WASHINGTON (AP) — A surge in optimism by Democrats over the prospects of Vice President Kamala Harris lifted U.S. consumer sentiment slightly this month.
The University of Michigan's consumer sentiment index edged up to 67.8 after coming in at 66.4 in July. Americans' expectations for the future rose, while their assessment of current economic conditions sank slightly.
The spirits of Democrats and political independents rose. Republicans' sentiment fell. The survey found that 41% of consumers considered Harris the better candidate for the economy, versus the 38% who chose Republican nominee Donald Trump. Before President Joe Biden dropped out of the presidential race and gave way to Harris, Trump held an advantage on the issue.
Joanne Hsu, the university's director of consumer surveys, said she expects the index to bounce with changing poll results as the election nears. Consumers on both sides of the partisan divide say their economic outlook "depends on who's going to win the election,'' she said.
The Michigan index has rebounded after bottoming out at 50 in June 2022 when inflation hit a four-decade high. But it remains well below healthy levels. Before COVID-19 hit the economy in early 2020 — causing a recession followed by an unexpectedly strong recovery that unleashed inflation — the Michigan index regularly registered in the 90s and occasionally crossed 100.
"Consumers are still pretty glum overall by historical standards, but sentiment is on an improving trend,'' said Carl Weinberg, chief economist at High Frequency Economics.
Economists watch measures of Americans' spirits to gauge whether they're in the mood to shop, important because their spending accounts for about 70% of U.S. economic activity.
Since inflation struck more than three years ago, Americans have been feeling grumpy. As the November presidential election approaches, many blamed President Biden for higher prices.
Despite their sour mood, American consumers have kept spending anyway. Largely because of that, the economy grew at a healthy 2.8% annual pace from April through June. Their spending has continued into the current quarter: The Commerce Department reported Thursday that retail sales climbed 1% from June to July, biggest jump since January 2023 on strong sales at electronics shops, supermarkets and auto dealerships.
The Federal Reserve responded to inflation's resurgence by raising its benchmark interest rate 11 times in 2022 and 2023, lifting it to a 23-year high. Inflation has cooled markedly since peaking at 9.1% in June 2022. By last month, it was down to 2.9%, edging closer to the Fed's 2% target.
The central bank is now widely expected to begin cutting rates at its next meeting in September.
The Michigan survey shows that consumers' expectations for future inflation have come down — though Americans remain frustrated that prices are still nearly 20% higher than they were when inflation picked up in early 2021. For the second straight month, consumers said in August that they expect prices to be 2.9% higher in one year. In mid-2022, as inflation roared, they expected prices to climb 5.3% over the next 12 months.
Their expectations are important because they can drive behavior. If you think something is going to be a lot more expensive in the future, you are more likely to buy it now, and that spending can drive prices higher. “If inflation expectations are high, that can be a self-fulfilling prophesy,’’ Hsu said. ”Policymakers do not want to see that.’’ So the Fed’s inflation fighters welcome signs that consumers foresee more modest price increases going forward.
Many U.S. consumers say they’ve noticed higher than usual prices for holiday gifts in recent months, according to a a December poll from The Associated Press-NORC Center for Public Affairs Research. A contributing factor is the unusually high import taxes the Trump administration put on foreign goods. While the worst-case consumer impact that many economists foresaw from the administration’s trade policies hasn’t materialized, some popular gift items have been affected more than others. Most toys and electronics sold in the U.S. come from China. So do most holiday decorations. Jewelry prices have risen due to the cost of gold.
Serbia’s prosecutor for organized crime has charged a government minister and three others with abuse of position and falsifying of documents related to a luxury real estate project linked to U.S. President Donald Trump’s son-in-law Jared Kushner. The charges came on Monday. The investigation centers on a controversy over a a bombed-out military complex in central Belgrade that was a protected cultural heritage zone but that is facing redevelopment as a luxury compound by a company linked to Kushner. The $500 million proposal to build a high-rise hotel, offices and shops at the site has met fierce opposition from experts at home and abroad. Selakovic and others allegedly illegally lifted the protection status for the site by falsifying documentation.
President Donald Trump has signed an executive order to block states from regulating artificial intelligence. He argues that heavy regulations could stifle the industry, especially given competition from China. Trump says the U.S. needs a unified approach to AI regulation to avoid complications from state-by-state rules. The order directs the administration to draw up a list of problematic regulations for the Attorney General to challenge. States with laws could lose access to broadband funding, according to the text of the order. Some states have already passed AI laws focusing on transparency and limiting data collection.
The New York Times and President Donald Trump are fighting again. The news outlet said Wednesday it won't be deterred by Trump's “false and inflammatory language” from writing about the 79-year-old president's health. The Times has done a handful of stories on that topic recently, including an opinion column that said Trump is “starting to give President Joe Biden vibes.” In a Truth Social post, Trump said it might be treasonous for outlets like the Times to do “FAKE” reports about his health and "we should do something about it.” The Republican president already has a pending lawsuit against the newspaper for its past reports on his finances.
President Donald Trump says he will allow Nvidia to sell its H200 computer chip used in the development of artificial intelligence to “approved customers” in China. Trump said Monday on his social media site that he had informed China’s leader Xi Jinping and “President Xi responded positively!” There had been concerns about allowing advanced computer chips into China as it could help them to compete against the U.S. in building out AI capabilities. But there has also been a desire to develop the AI ecosystem with American companies such as chipmaker Nvidia.
House Republicans in key battleground districts are working to contain the political fallout expected when thousands of their constituents face higher bills for health insurance coverage obtained through the Affordable Care Act. For a critical sliver of the GOP majority, the impending expiration of the enhanced premium tax credits after Dec. 31 could be a major political liability as they potentially face midterm headwinds in a 2026 election critical to President Donald Trump’s agenda. For Democrats, the party’s strategy for capturing the House majority revolves around pinning higher bills for groceries, health insurance and utilities on Republicans.
