The final University of Michigan Consumer Sentiment was unrevised at 98.4 in July, and quite similar to the 98.2 in June. The component for current conditions softened a bit to 110.7 (previously 111.1) while the six-month expectations firmed a tad to 90.5 (previously 90.5). The minor shifts still leave consumers’ optimism about the economy at a high level. In spite of the uncertainties for the economy — primarily related to trade and tariffs — consumers are pleased with a strong labor market and rising incomes, and hopeful that the situation will continue.
The July inflation expectations readings were also not very different from the preliminary estimates. Inflation expectations for 1 year were an unrevised 2.6%, down a little from the 2.7% in June. Some of this is fluctuations in gasoline prices. While not at recent highs, it remains above the low end of current range of about 2.5%-2.9%. Inflation expectations for 5 years — which is a better reference for the Fed’s medium term outlook — was revised down a tenth to 2.5% for July (previously 2.6%), but it is above the 2.3% in June. If overall inflation expectations remain quite tame, they have not lost their anchor.
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