Consumer sentiment rebounded in August for the first time in five months.
The latest University of Michigan consumer sentiment survey released Friday showed that sentiment ticked higher in August. The index reading for the month came in at 67.8, up from 66.4 in July and above the 66.9 economists had expected. It was the highest reading of consumer sentiment since June.
The reading on consumer sentiment comes amid a volatile two weeks for the stock market and the overall narrative surrounding the US economy. A weaker-than-expected July jobs report fueled concerns about how rapidly the US labor market is cooling, helping spark a market sell-off.
But that narrative has shifted this week as the latest data prints have shown inflation continues to fall toward the Fed's 2% goal while consumer spending holds up and the pace of jobless claims doesn't accelerate.
"This week's jam-packed data calendar delivered mostly good news," Bank of America Securities head of economics Michael Gapen wrote in a weekly note on Friday. "Inflation was generally tepid, and activity still looks healthy."
According to the Michigan survey, inflation expectations were unchanged in August, with consumers expecting inflation at 2.9% over the next year and 3% over the next five to 10 years. Consumers' expectations of inflation over the next year remain at their lowest level since December 2020.
Presidential election developments proved to be a big driver of the August survey, according to Surveys of Consumers director Joanne Hsu. Sentiment for Democrats rose 6% as Vice President Kamala Harris gained ground in public polling. Meanwhile, sentiment for Republicans fell 5%. The survey showed that 41% of consumers believe Harris is the better candidate for the economy, while 38% said Trump is better.
"Survey responses generally incorporate who, at the moment, consumers expect the next president will be," Hsu said in the release. "Some consumers note that if their election expectations do not come to pass, their expected trajectory of the economy would be entirely different."
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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