Gas Price Drop Boosts Confidence! US Michigan Consumer Sentiment Hits Five-Month High in July; Experts Warn of Weak Momentum

US consumer confidence rose to a five-month high in July, exceeding market expectations, as falling gasoline prices eased the financial burden on households. However, with the Middle East conflict escalating again and pushing oil prices higher, survey institutions warn that the recent rebound in confidence may be temporary, and the economy still faces the risk of inflation rebounding.

The University of Michigan released preliminary findings on Friday (17th), showing the July consumer sentiment index rose to 54.4 from June's final reading of 49.5—its highest level since February this year. This not only surpassed the 51.0 forecast by economists surveyed by Reuters but also exceeded all analyst expectations compiled by Bloomberg.

Gas price drop saved confidence—US Michigan consumer sentiment hits five-month high in July. (Image: ZeroHedge)

The survey was conducted from June 23 to July 13, with over 70% of respondents completing interviews before the renewed escalation of tensions between the US and Iran. As such, the recent rebound in oil prices has not yet been fully reflected in consumer sentiment.

Joanne Hsu, survey director at the University of Michigan, said consumer confidence has rebounded sharply for two consecutive months, thanks to lower recent fueling costs. In July, it reached a five-month high, with broad improvements across all age groups, income levels, wealth brackets, and political affiliations—particularly notable among those without a college degree.

The report shows all five sub-indexes improved. The index for durable goods purchasing conditions surged 20%, reaching its highest level since October last year, indicating many households believe they should buy big-ticket items before prices rise further.

Inflation expectations also cooled slightly. Consumers expect inflation to be 4.2% over the next year, down from 4.6% in June. Long-term inflation expectations for the next five to ten years remained steady at 3.3%. Earlier this week, data showed US consumer prices cooled in June, further easing market concerns about short-term inflation.

Inflation expectations slightly cooled. (Image: ZeroHedge)

However, Hsu cautioned that the cost of living in the US remains high, and consumer confidence is still about 12% lower than a year ago, with overall sentiment far from optimistic. If oil prices continue to rise due to worsening Middle East tensions, the momentum behind this recent improvement in consumer confidence may be hard to sustain, potentially reigniting market concerns about inflation returning.