Consumer sentiment rose for the first time in five months, according to the University of Michigan’s survey in August. The increase is driven by the jump in expectations as consumer sentiment about the next 12 months look better.
The topline sentiment index is up to 67.8 from 66.4 in July, with the expectation index rising to 71.1 from 68.8, the highest since April.
What consumers are looking for is a drop in interest rates which will likely jump start the economy again. The subindex for interest rate expectations increased sharply, which means consumers believe that interest rates will come down fast in the next 12 months.
That said, concerns over the current economic conditions remain a drag within the survey. Sentiment over the current conditions continue to drop in the fifth straight month to 60.9, the lowest since 2022.
That is one of the key factors bringing the purchasing appetite down slightly in August. All the subindexes for buying intentions edge downward on the month.
It is likely that consumers are in a waiting mode, pulling some of their spending back until interest rates fall in the last quarter of the year. That is quite reasonable, given that most of the big-ticket items like housing, autos and appliances often require financing.
Consumer expectations for inflation remained unchanged with the 12-month expectations staying at 2.9% and the five to 10-year expectations at 3.0%.
Read the latest issue of RSM’s The Real Economy for Chief Economist Joe Brusuelas’s take on the need for rate cuts that prioritize growth.
