U.S. Consumer Sentiment Rises in August

(Reuters) – U.S. consumer sentiment increased in August, driven by developments in the race for the White House, while inflation expectations remained unchanged over the next year and beyond, according to a survey released on Friday.

The University of Michigan’s preliminary reading on the overall index of consumer sentiment stood at 67.8 this month, up from a final reading of 66.4 in July. Economists polled by Reuters had forecast a preliminary reading of 66.9.

Presidential Election Impact

Regarding the Nov. 5 U.S. presidential election, the survey noted a 6% increase in sentiment among self-identified Democrats following President Joe Biden’s withdrawal from the race and Vice President Kamala Harris’ nomination, marking the first rise since March.

Conversely, sentiment among Republicans fell 5% in August, hitting its lowest level since last November. Sentiment among self-identified independent voters, whose views have closely mirrored those of Republicans this year, rose 3%, marking the first increase since January.

Candidate Comparisons

This survey, the first conducted since Biden’s withdrawal on July 21, indicated that 41% of consumers viewed Harris as the better candidate for the economy, compared to 38% for Republican nominee Donald Trump. Trump held a five-point advantage over Biden on economic issues between May and July.

Economic Expectations

Overall, expectations improved for both personal finances and the five-year economic outlook, which reached its highest level in four months. Joanne Hsu, the director of the University of Michigan’s Surveys of Consumers, stated that while election developments can influence future expectations, they are unlikely to alter current assessments.

The survey’s reading of one-year inflation expectations remained stable at 2.9% in August, consistent with July. The five-year inflation outlook stayed at 3.0% for the fifth consecutive month.

Additionally, an alternative sentiment survey by the New York Federal Reserve indicated a significant easing in medium-term inflation expectations among consumers in July, even as their near- and longer-term outlooks for price pressures held steady.