U.S. consumer confidence improved in July, reaching nearly the highest level in a decade, stated the University of Michigan’s monthly survey.
It is calculated based on telephone surveys that gather information on consumer expectations with respect to three general areas of consumer confidence: personal finances, terms of business, and conditions of purchase.
According to the data released on Friday, July 19, this confidence rose to 98.4 from a value of 98.2 in June, maintaining the upward trend of the last 30 months.
According to the survey data the inflation expectation is the most interesting change in the July survey.
“Inflation expectations were divided into three groups based on responses to the January to July 2019 surveys: those who expected a year-ahead inflation rate less than or equal to 0%, an inflation rate of 1% to 3%, and those who expected an inflation rate equal to or greater than 4%,” the study authors explain.
Analysis of the data revealed that the Consumer Sentiment Index falls as inflation expectations rise, meaning that consumers see higher inflation as a threat to economic growth.
In addition, consumers associate inflation with rising interest rates and a higher risk of unemployment, hence citizens’ greater interest in Federal Reserve (Fed) policies.
“Consumers’ views appear to be more consistent with the stagflation thesis, which holds that inflation and unemployment move in the same direction,” the authors stated.
According to Bloomberg, this data is in line with its weekly comfort gauge, “which climbed last week to a fresh 18-year high on stronger views of the buying climate and personal finances.”