Consumers More Confident, But Fear Inflation, Hsu Says

Summary

Joanne Hsu, director of the University of Michigan Surveys of Consumers, discusses the latest consumer sentiment report showing a rise to a five-month high, driven by lower gas prices and broadly improved sentiment across demographics, though inflation expectations remain elevated and wealth gaps persist in economic outlooks.

• Consumer sentiment rose for the second straight month, up about 20% from May levels but still historically low.
• Improvement was largely attributable to falling gas prices and softer inflation worries.
• One-year inflation expectations fell to 4.2% from 4.6% prior, though still above February levels.
• Long-term (5-10 year) inflation expectations held steady at 3.3%, above pre-pandemic norms.
• The sentiment improvement was seen across all demographic groups, including political affiliation, age, income, and education.
• A large wealth gap persists, with wealthier consumers showing stronger sentiment and driving aggregate spending, while lower-income consumers remain pessimistic.