(Bloomberg) — US consumer sentiment rose to a four-month high in early September, helped by the tamest short-term inflation expectations since the end of 2020 and prospects for lower borrowing costs.
The sentiment index increased to 69 from August’s 67.9, preliminary figures from the University of Michigan showed Friday. The median estimate in a Bloomberg survey of economists called for a reading of 68.5.
Consumers expect prices to rise at an annual rate of 2.7% over the next year compared with the 2.8% expected a month earlier. That represented a fourth month of declining short-term inflation expectations. They saw inflation rising 3.1% on an annualized basis over the next five to 10 years, up from 3% a month earlier.
The survey showed a larger share of consumers viewed unemployment as potentially more worrisome now than inflation. That view is consistent with Federal Reserve officials who are expected to start lowering interest rates at their meeting next week.
“Consumers voiced fewer concerns this month over high prices for durables, vehicles, and homes, as well as their personal finances,” Joanne Hsu, director of the survey, said in a statement.
Respondents were also more upbeat about the economy’s prospects, with 54% anticipating interest rates to decline in the coming year, matching a high seen in 1980. At the same time, the views of many consumers were contingent on who wins the presidential election in November.
Consumer sentiment among Democrats rose in September but fell among Republicans as a growing share of voters from both parties anticipated a win by Vice President Kamala Harris, according to the report. Sentiment among political independents was little changed.
The university’s expectations index increased to a five-month high of 73, while the current conditions gauge rose for the first time in six months.
Consumers’ perception of their expected financial situation increased in September to 112, also the highest since April.
–With assistance from Chris Middleton.
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