UMich Sentiment Surges Higher As Inflation Expectations Plunge

Following June’s bounce, preliminary July data from UMich’s Sentiment survey was expected to continue rebounding… and it did.

The headline sentiment index rose from 60.7 to 61.8 (above the 61.5 exp) with a big bounce in Current Conditions (from 64.8 to 66.8) and a small rise in future expectations from 58.1 to 58.6. All better than expected and all at their highest level since February…

Source: Bloomberg

“Consumers’ expectations over business conditions, labor markets, and even their own incomes continue to be weaker than a year ago,” Joanne Hsu, director of the survey, said in a statement.

“That said, the recent two-month lift in sentiment suggests that consumers believe that the risk of the worst-case scenarios they expected in April and May has eased,’’ Hsu said.

The spread between Republican and Democrat sentiment is back at record wides…

Source: Bloomberg

Most notably, inflation expectations tumbled from 5.0% to 4.4% (1Y) and from 4.0% to 3.6% (5-10Y)…

Source: Bloomberg

With Democrats and Independents finally realizing that their insane expectations for inflation were just that…

Source: Bloomberg

And the same picture emerges on the longer-term expectations.

Source: Bloomberg

Well, this puts more pressure back on Powell as 'inflation expectations’ seem like they are back under control.