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• US consumer sentiment rose to 61.8 in July 2025, up from 60.7 in June, marking a five-month high.
• Inflation expectations dropped to 4.4% for the year ahead, the lowest since Feb 2025, though risks persist.
• Trade policy uncertainties and inflation concerns continue to temper overall consumer confidence.

In a positive development for the US economy, consumer sentiment has shown improvement in July 2025, reaching a five-month high according to the latest data from the University of Michigan’s Surveys of Consumers.

The preliminary Consumer Sentiment Index rose to 61.8 this month, up from 60.7 in June, signaling a cautious optimism among American households.

While this uptick offers a glimmer of hope amidst ongoing economic uncertainties, persistent concerns about inflation and trade policies continue to temper confidence.

This article delves into the latest figures, their implications, and the broader economic context shaping consumer attitudes in the United States.
 

A modest rise in consumer confidence

The University of Michigan’s preliminary report for July 2025 indicates a slight but notable improvement in consumer sentiment, with the index climbing to 61.8, the highest level since February 2025.

This increase reflects a 1.8% rise from June’s reading of 60.7, driven by improved perceptions of current economic conditions.

The Current Conditions Index, which measures consumers’ views on the present economic environment, rose to 66.8 from 64.8 in June, surpassing consensus estimates of 63.9.

Meanwhile, the Expectations Index, which gauges future economic outlooks, edged up slightly to 58.6 from 58.1, indicating tempered hope for the months ahead.

Despite this progress, consumer sentiment remains significantly below its historical average and is down 17% from December 2024 levels, highlighting a lingering unease among Americans.

Analysts note that while the recent data suggests a stabilization in consumer attitudes, the overall sentiment is still far from robust, reflecting a complex economic landscape marked by inflation concerns and policy uncertainties.
 

Inflation expectations ease but risks persist

One of the key drivers behind the improved sentiment in July 2025 is a decline in inflation expectations.

According to the University of Michigan survey, consumers’ year-ahead inflation expectations dropped to 4.4% from 5.0% in June, marking the lowest reading since February 2025.

Long-run inflation expectations also fell to 3.6% from 4.0% last month.

This easing of inflation fears has provided some relief to households grappling with rising prices over the past year.

However, experts caution that consumers still perceive a substantial risk of future price increases.

Joanne Hsu, director of the Surveys of Consumers, noted that while inflation expectations have declined, they remain above December 2024 levels, suggesting that Americans are not fully convinced that inflationary pressures are under control.

“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,” Hsu stated in a recent report published by Reuters.
 

Economic and policy factors at play

The broader economic context provides critical insight into the factors influencing consumer sentiment in July 2025.

The US economy has faced a series of challenges over the past year, including fluctuating interest rates, geopolitical tensions, and debates over trade tariffs.

Recent policy developments, such as the passage of a tax and spending bill, have not significantly swayed consumer attitudes, according to the University of Michigan’s findings.

This lack of impact suggests that Americans are more focused on immediate concerns like inflation and personal financial stability than on legislative changes.

Additionally, trade policy remains a point of contention.

Reports from McKinsey’s ConsumerWise research earlier this year indicated that many US consumers are adjusting their spending habits in response to potential tariffs, a trend that could continue to affect sentiment if uncertainties persist.

The interplay between domestic policy and global economic conditions will likely remain a key determinant of consumer confidence in the coming months.
 

Implications for the US economy

The improvement in consumer sentiment, though modest, carries important implications for the US economy.

Consumer spending accounts for approximately 70% of economic activity in the United States, making confidence a critical indicator of future growth.

A sustained increase in sentiment could translate into higher spending, potentially bolstering retail sectors and supporting economic recovery efforts.

However, with sentiment still well below historical averages, the path to a full recovery remains uncertain.

Economists are particularly focused on how inflation expectations and trade policies will evolve.

If inflation continues to moderate and trade uncertainties are resolved, consumer confidence could see further gains.

Conversely, any resurgence in price pressures or disruptions in global trade could dampen the recent progress.

As Bloomberg reported, the rise in sentiment reflects an improvement in expectations about the economy and inflation, but it is not yet indicative of a broad-based optimism among Americans.

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