US consumer sentiment rose significantly in early July 2026, with the University of Michigan's preliminary index climbing 10% to 54.4, the highest level since February 2026. This increase, which surpassed all analyst expectations clustered around 51.0, was largely attributed to a decrease in gasoline prices that offered some relief to household budgets. However, despite this improvement, sentiment remains 12% lower than a year ago, reflecting ongoing concerns about high prices.
The improvement was broad-based across different age, income, and political affiliation groups. Consumers' expectations for inflation over the next year decreased to 4.2% from 4.6% in June, while the five-to-ten-year outlook for inflation remained steady at 3.3%. This suggests a perceived easing of immediate price pressures.
While lower gas prices were the main driver, the outlook is clouded by recent geopolitical developments. The survey period, from June 23 to July 13, 2026, means that over 70% of responses were collected before the US resumed military strikes against Iran on July 7. Since then, renewed fighting in the Middle East has started to push gas prices higher again, muddying the inflation outlook and potentially reversing the recent gains in consumer sentiment. The national average gas price was $3.98 per gallon as of July 17.
Despite the July rebound, the index at 54.4 is still well below historical averages and the 61.7 recorded in July 2025. Consumer sentiment held at a record low of 44.8 in May 2026 due to surging oil and gas prices. The Conference Board's Consumer Confidence Index also showed a slight increase in June, rising to 91.2 from 90.6 in May, offering a complementary signal of improving sentiment. Analysts note that while the current inflation expectations are within tolerable ranges, the upward momentum in sentiment may be difficult to sustain if gas prices continue to rise.
