Preliminary reading of 72.6 far exceeded Bloomberg consensus of 65.5. That’s an increase of one standard deviation (calculated for the last three years).

Figure 1: University of Michigan Sentiment Index (blue), Bloomberg consensus of 7/14 (light blue +), and Conference Board Confidence Index (tan). July Sentiment Index is preliminary. NBER defined peak-to-trough recession dates shaded gray. Source: University of Michigan via FRED, Conference Board via investing.com, Bloomberg, and NBER. 

The increase in sentiment came from both current conditions as well as expectations (for more discussion of determinants of the indices, see this post). The UMich director attributed the gain to gathering confidence in the stabilization of inflation (Investopedia) This shift is shown in Figure 2.

Figure 2: Actual year-on-year CPI inflation (bold black), University of Michigan one year expected inflation (blue), Bloomberg consensus of 7/14 (light blue +), and Survey of Professional Forecasters expected inflation (red +). July inflation is preliminary. NBER defined peak-to-trough recession dates shaded gray. Source: BLS, University of Michigan via FRED, Philadelphia Fed, Bloomberg, NBER, and author’s calculations.

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