U.S. consumer sentiment climbs to 4-month high on slower inflation and end of debt-ceiling fight

The consumer-sentiment survey reveals how consumers feel about their own finances as well as the broader economy.

The index has risen in fits and starts from an all-time low of 50 last year, but it’s still historically weak. The index peaked at 101 shortly before the onset of the pandemic in 2020.

Key details: A gauge that measures what consumers think about the current state of the economy rose to 69 from an initial 68.

A measure that asks about expectations for the next six months edged up to 61.5 from an initial 61.3.

Both indexes are also quite soft, however.

Inflation expectations were unchanged from earlier in the month. Americans think inflation will average 3.3%) in the next year.

Big picture: Americans don’t appear all that worried about recession despite persistent forecasts of an impending downturn. They are still spending at healthy levels, no doubt because of rising incomes and strong job security.

Higher interest rates are likely to take a toll eventually, however, and soften up consumer spending and the economy. The Federal Reserve is expected to raise rates at least once more this year after a series of rate hikes since the spring of 2022.

Looking ahead: The recent upswing in sentiment “reflects a recovery in attitudes generated by the early-month resolution of the debt ceiling crisis, along with more positive feelings over softening inflation,” said Joanne Hsu, director of the survey.

“Views of their own personal financial situation were unchanged, however, as persistent high prices and expenses continued to weigh on consumers,” she said.

Market reaction: The Dow Jones Industrial Average
DJIA,
+0.84%
and S&P 500
SPX,
+1.23%
rose in Friday trades.