WASHINGTON (AP) – A surge in Democratic optimism about the prospects of Vice President Kamala Harris lifted U.S. consumer sentiment slightly this month.
The University of Michigan consumer sentiment index rose to 67.8 from 66.4 in July. Americans’ expectations for the future rose, while their assessment of the current economic situation fell slightly.
The spirits of Democrats and political independents rose. Republican morale fell. The survey found that 41 percent of consumers thought Harris was the better candidate for the economy, while 38 percent chose Republican nominee Donald Trump. Before President Joe Biden dropped out of the presidential race and gave way to Harris, Trump had the upper hand.
Michigan’s index has rebounded after bottoming out at 50 in June 2022 as inflation hit a four-decade high. But it remains well below healthy levels. Before COVID-19 hit the economy in early 2020 — causing a recession followed by an unexpectedly strong recovery that triggered inflation — the Michigan index regularly registered in the 90s and occasionally topped 100.
“Consumers are still pretty gloomy historically, but sentiment is improving,” said Carl Weinberg, chief economist at High Frequency Economics.
Economists monitor the mood of Americans to gauge whether they want to shop. This is important because their spending accounts for about 70 percent of US economic activity.
Ever since inflation hit more than three years ago, Americans have felt sick. With the November presidential election approaching, many blamed President Biden for the rise in prices.
Despite the sour mood, American consumers have been spending anyway. Mainly due to this, the economy grew at a healthy 2.8 percent annual rate from April to June. Their spending spree has continued this quarter: The Commerce Department reported Thursday that retail sales rose 1% from June to July, the biggest jump since January 2023, thanks to strong sales at electronics stores, supermarkets and auto dealerships.
The Federal Reserve responded to the acceleration in inflation by raising its key interest rate 11 times in 2022 and 2023, taking it to a 23-year high. Inflation has cooled significantly since peaking at 9.1 percent in June 2022. Last month, it had eased to 2.9 percent, closer to the Fed’s 2 percent target.
The central bank is now widely expected to start cutting interest rates at its next meeting in September.
