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First Cut: Final July Consumer Sentiment Index unrevised at the headline, with current conditions softer, outlook firmer

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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