WASHINGTON – Americans' outlook on the economy improved for the second straight month in September, bolstered by lower prices for long-lasting goods such as cars and furniture and the prospect of interest rate cuts by the Federal Reserve.
The University of Michigan's consumer sentiment index ticked up to 69 in its preliminary reading, its highest level since May and up from 67.9 in August. The gain was driven by consumers' perceptions that prices have improved for durable goods, the report from University of Michigan said.
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The survey bottomed out in June 2022, when inflation peaked at 9.1%, and has since risen by about 40%, though it remains significantly below pre-pandemic levels. The long-term average for the index is nearly 85, according to Capital Economics.
“Consumers remain guarded as the looming election continues to generate substantial uncertainty,” said Joanne Hsu, director of consumer surveys at University of Michigan.
Hsu also said that, “a growing share of both Republicans and Democrats now anticipate a Harris win." The survey was conducted before Tuesday's debate. Consumer sentiment rose among Democrats, but ticked down slightly among independents and Republicans.
The proportion of consumers expecting interest rates to decline over the next 12 months rose to 54%, the highest on records dating back to 1978. The Fed is set to cut its interest rate by at least a quarter-point next week.
Rising consumer confidence can sometimes signal a greater willingness to spend, though Americans have largely continued to spend at a healthy pace even though their confidence, as measured in surveys, has been subdued.
The economy expanded at a solid 3% annual rate in the April-June quarter, and retail spending picked up in July. Yet Americans have been saving less and running up more credit card debt, which has raised concerns among some economists that consumers will soon have to cut back, potentially slowing growth.