Consumer Sentiment Stabilizes In July

Consumer sentiment did fall noticeably in June but stabilized well in July at 98.4, up 2 tenths from June and unchanged from the preliminary July reading. Consumer expectations, one of the two components of the headline, are often sensitive to long-term issues in the economy such as tariffs, and here this reading bounced back 1.2 points to 90.5 after falling 4.2 points during the trade turbulence of June. The current conditions component is steady at 110.7 and has been largely steady over the last several months. Inflation expectations are mixed: up 2 tenths for the year-ahead outlook and back in trend at 2.5 percent but down 1 tenth to 2.6 percent for the 5-year outlook.

Stable inflation expectations are a primary concern for the Federal Reserve especially Chair Jerome Powell who frequently cites the paramount necessity of keeping these expectations firm and on track, which makes the recovery in this report's year-ahead measure encouraging. And likewise encouraging is the steady headline showing as well as the surprising jump in the consumer confidence report issued Tuesday of this week. The consumer, backed by solid job growth, looks to remain in place as the fundamental driver of the economy.