• Economic prospects remain half as favorable as pre-crisis
  • Consumer spending may be at risk without further fiscal aid

U.S. consumer sentiment increased slightly in late August on an improving economic outlook, while remaining well below pre-pandemic levels.

The University of Michigan’s final sentiment index for August was 74.1, compared with a preliminary reading of 72.8 and July’s final reading of 72.5, according to data released Friday. The median estimate from economists surveyed by Bloomberg called for 72.8; the gauge is still just above April’s pandemic low of 71.8.

The gauge of current conditions rose 0.1 point to 82.9 and compared with the preliminary reading of 82.5, while a measure of expectations increased 2.6 points to 68.5.

The uptick in sentiment shows that Americans are still holding out some hope for an economic rebound, though prospects are “half as favorable as six months ago,” the report said. The gauge remains well below pre-crisis levels, pointing to a slow economic recovery as well as the impact of the surge in coronavirus infections in June and July.

“Although strong gains in consumer spending from the second-quarter lows can be anticipated, those gains will significantly slow without some additional spending programs to diminish the hardships faced by unemployed workers, small businesses, as well as support for state and local governments,” Richard Curtin, director of the survey, said in a statement.

A separate government report earlier Friday showed that the rebound in consumer spending moderated in July amid the surge in virus cases, with further gains at risk because of a cut to supplemental jobless benefits.

Earlier this week, the Conference Board’s consumer confidence index hit a six-year low, further highlighting the impact of the pandemic on American households.

The Michigan report also showed inflation expectations for the year ahead remained slightly elevated at 3.1%, reflecting more significant price concerns among middle- and lower-income consumers, according to the report.

The partisan divide widened between Democrats and Republicans in August, with Republicans’ confidence up 4.1 points and Democrats’ rising 1.5 points — resulting in a gap of 41 points.

The Michigan survey was conducted July 29 to Aug. 24. The cutoff for the preliminary results was Aug. 12.

–With assistance from Kristy Scheuble.

To contact the reporter on this story:
Olivia Rockeman in New York at [email protected]

To contact the editors responsible for this story:
Scott Lanman at [email protected]