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Investing.com - U.S. consumer sentiment touched its highest point in five months in July, but remains well below its historical average, as concerns swirl around the impact of sweeping U.S. tariffs.
The University of Michigan’s closely-watched consumer sentiment index came in at 61.8 for the month, up from 60.7 in May and higher than economists estimates of 61.4.
One-year inflation expectations also cooled for the second consecutive month to 4.4%, down from 5.0%, while the five-year gauge inched down to 3.6% from 4.0%. Both readings are the lowest since February, but are still higher than December 2024, in a sign that Americans may be perceiving continued inflation risks in the future.
"Consumers are unlikely to regain their confidence in the economy unless they feel assured that inflation is unlikely to worsen, for example if trade policy stabilizes for the foreseeable future," said Joanne Hsu, Director of the University of Michigan’s Surveys of Consumers, in a statement.
Hsu added that, at this time, respondents revealed little evidence that other recent policy developments, such as the passage of President Donald Trump’s signature budget bill, "moved the needle much on consumer sentiment."
Economists have warned that Trump’s aggressive tariffs could drive up inflationary pressures and weigh on broader economic activity -- however, reports this week have painted a picture of an American economy that seems to be on solid footing.
On Thursday, retail sales figures were stronger than anticipated, while weekly jobless claims came in below forecasts. Inflation also stayed broadly in line with expectations in June, although the tariffs seem to be pushing the prices of some goods higher.
A key August 1 deadline for Trump’s elevated "reciprocal" tariffs to take effect looms large, with the White House suggesting that some new agreements with individual countries could be coming before that date. So far, preliminary trade deals have been reached with a handful of nations, including the United Kingdom (TADAWUL:4280), China, Vietnam, and Indonesia.
Others, such as major U.S. trading partners like the European Union, have yet to reach a pact to avoid Trump’s heightened levies.