US consumer sentiment rises slightly on Democrats' optimism about Harris' presidential prospects

WASHINGTON (AP) — A surge in Democratic optimism about Vice President Kamala Harris' prospects has pushed U.S. consumer sentiment up slightly this month.

The University of Michigan's consumer sentiment index rose to 67.8 from 66.4 in July. Americans' expectations for the future rose, while their assessment of the current economic situation fell slightly.

Sentiment rose among Democrats and political independents. Sentiment fell among Republicans. The poll found that 41 percent of consumers thought Harris was the better candidate on the economy, while 38 percent chose Republican candidate Donald Trump. Before President Joe Biden dropped out of the presidential race and let Harris take the lead, Trump had an advantage on that issue.

The Michigan index has rebounded after bottoming out at 50 in June 2022, when inflation hit a four-decade high. But it is still well below healthy levels. Before COVID-19 hit the economy in early 2020 — triggering a recession followed by an unexpectedly strong recovery that sparked inflation — the Michigan index was regularly in the 90s and occasionally exceeded 100.

“Consumers overall are still quite depressed by historical standards, but sentiment is improving,” said Carl Weinberg, chief economist at High Frequency Economics.

Economists monitor Americans' mood to determine whether they are in the mood to shop. This is important because their spending accounts for about 70 percent of U.S. economic activity.

Americans have been grumpy since inflation struck more than three years ago. With the presidential election in November approaching, many are blaming President Biden for the higher prices.

Despite their bad mood, American consumers have continued to spend money anyway. This is largely why the economy grew at a healthy annual rate of 2.8 percent from April to June. They have continued to spend in the current quarter, too: The Commerce Department reported Thursday that retail sales rose 1 percent from June to July, the largest increase since January 2023, driven by strong sales at electronics stores, supermarkets and car dealerships.

The Federal Reserve responded to the resurgence in inflation by raising its benchmark interest rate 11 times in 2022 and 2023, bringing it to a 23-year high. Inflation has cooled significantly since peaking at 9.1% in June 2022. Last month, it had fallen to 2.9%, approaching the Fed's 2% target.

The central bank is now widely expected to begin cutting interest rates at its next meeting in September.