Consumer confidence rises more than expected in August as gas prices drop

Consumer confidence in U.S. economy remains near record low

U.S. consumer sentiment climbed more than expected in August as gas prices dropped nationwide, but Americans' confidence in the economy remains near a record low. 

The University of Michigan’s consumer sentiment index rose to 55.1 in August – up from the July reading of 51.5 and above economists' forecast for a reading of 52.5. That is still more than a 21% drop from just one year ago, when the gauge was at 70.3.

"All components of the expectations index improved this month, particularly among low- and middle-income consumers for whom inflation is particularly salient," survey director Joanne Hsu said in a statement.

Consumers expect prices to rise 5% over the next year, a six-month low but well above the pre-pandemic average. Americans believe prices will rise at an annual rate of 3% over the next five to 10 years, which is up slightly from July.


A gas station off in the distance

Gas prices listed at a petrol station in Los Angeles July 19, 2022.  (FREDERIC J. BROWN/AFP via Getty Images / Getty Images)

While Americans remain concerned about the state of the economy as painfully high inflation persists, a recent decline in the price of gasoline helped to bolster the economic mood nationwide. After hitting a record high of $5.01 per gallon in mid-June, a gallon of gas now costs less than $4, according to AAA.  

The data comes just two days after the Labor Department reported that the consumer price index, a broad measure of the price for everyday goods including gasoline, groceries and rents, rose 8.5% in July from a year ago, below the 9.1% year-over-year surge recorded in June. Prices were unchanged in the one-month period from June.

Those figures were both lower than the 8.7% headline figure and 0.2% monthly gain forecast by Refinitiv economists, likely a welcoming sign for the Federal Reserve as it seeks to cool price gains and tame consumer demand. 

So-called core prices, which strip out the more volatile measurements of food and energy, climbed 5.9% from the previous year, below the 6.1% forecast from economists but matching the reading from July.

US inflation

A person shops in the meat section of a grocery store on November 11, 2021 in Los Angeles.  ((Photo by Mario Tama/Getty Images) / Getty Images)

Still, experts cautioned that while the July slowdown is a step in the right direction, inflation remains painfully high and could be slow to return to the Fed's preferred target of 2%.  

Although energy prices declined in July, the cost of food skyrocketed, with groceries surging 1.3% in the one-month period from June, pushing the annual gain to 13.1% – the highest since 1979. 


"July’s CPI report is a good start due to lower gas prices and drops in some other key categories, such as used cars," said Robert Frick, corporate economist with Navy Federal Credit Union. We’ll need a few more of these to call a peak and to see a meaningful downward trend… But high inflation is with us into next year."