US consumer sentiment ticked up from historic lows more than expected in August, as easing inflation improved consumers’ outlook and price expectations fell to their lowest level in eight months.
The widely-followed consumer sentiment index in a University of Michigan survey rose to a final reading of 58.2 in August. That was up from the preliminary reading of 55.1 and surpassed economists’ expectations for a revision to 55.2, according to Refinitiv polling.
The median expected year-ahead inflation rate ticked down to 4.8 per cent from 5.2 per cent in July, marking its lowest reading in eight months.
“The gains in sentiment were seen across age, education, income, region, and political affiliation, and can be attributed to the recent deceleration in inflation,” Joanne Hsu, an economist at the University of Michigan, said in a release on Friday.
While August showed improvement, sentiment is still historically low and down 17 per cent from a year ago when the reading was 70.3.
The Michigan survey’s index of consumer expectations also jumped to 58 from a reading of 47.3 in July.
Personal financial expectations rose 12 per cent from July, as lower-income consumers posted large gains. “Their sentiment now even exceeds that of higher-income consumers, when it typically lags,” Hsu said.
While falling petrol prices helped moderate inflation expectations, a further turnround is not expected.
“Price pressures and economic uncertainty remain elevated, making any sustained rallies for sentiment unlikely,” said Matthew Martin, US economist at Oxford Economics.