Consumer sentiment confirmed its early-July reading, landing almost 12% above June, according to the University of Michigan Surveys of Consumers.
Broad-based improvements were seen across all groups by income, education, wealth and political party. Despite recent gains, sentiment is 11% below a year ago, reflecting a generally downbeat view of the economy amid five years of elevated inflation and persistent high prices.
Consumers remain focused on pocketbook issues like purchasing power, while political or military developments remain more in the background.
"Despite this month's improvement in sentiment, consumers do not feel like they are thriving in the current economy," said U-M economist Joanne Hsu, director of the surveys. "While consumers certainly appreciate that gasoline prices remain below the highs seen in May 2026, the continuation of shipping constraints in the Middle East may make it challenging to sustain any upward momentum in confidence."
Personal finances weighed down by persistence of high prices
High prices continue to be one of the most important factors influencing consumer views of the economy. Spontaneous mentions of high prices eroding personal finances did decline a touch from 56% of consumers last month to 50% in July, likely due to the fact that gas prices remain lower than their May high, Hsu said.
Mentions of high prices remain well above the 46% seen in February prior to the Iran conflict and 39% a year ago.
"High prices are, by far, the top factor for personal finances cited by consumers and felt most acutely by those with lower incomes," Hsu said.
Emerging concerns about AI
Artificial intelligence has become another key factor influencing consumers' views of the economy.
For three consecutive months, at least 10% of consumers spontaneously mentioned AI at some point during the interviews, gradually increasing from less than 1% in January 2025. Most AI mentions were in the context of news heard about the economy, with a mix of consumers citing AI's positive potential for driving gains in productivity and the stock market, and negative potential for driving job loss.
Other consumers cite concerns that data centers may drive up local electricity prices.
"On balance, negative comments on AI outweigh positive comments," Hsu said. "Still, at this time, AI is far less important for consumer views of the economy than gasoline prices, mentioned by nearly one-third of consumers, generally in the context of consumers' direct personal experiences."
Consumer Sentiment Index
The Consumer Sentiment Index rose to 55.2 in the July 2026 survey, up from 49.5 in June and below last July's 61.7. The Current Index rose to 54.8, up from 47.7 in June and below last July's 68.0. The Expectations Index rose to 55.4, up from 50.7 in June and below last July's 57.7.
About the surveys
The Surveys of Consumers is a rotating panel survey at the University of Michigan Institute for Social Research. It is based on a nationally representative sample that gives each household in the coterminous U.S. an equal probability of being selected. Interviews are conducted throughout the month by web. The minimum monthly change required for significance at the 95% level in the Sentiment Index is 4.8 points; for the Current Economic Conditions Index and Index of Consumer Expectations, the minimum is 6 points.
About ISR
Established in 1949, the Institute for Social Research at the University of Michigan is among the world's oldest social science research organizations and a world leader in the development and application of social science methodology. ISR conducts some of the most widely cited surveys and studies in the nation, including the University of Michigan Surveys of Consumers, American National Election Studies, Monitoring the Future Study, Panel Study of Income Dynamics, Health and Retirement Study, National Survey of Black Americans and World Values Survey. ISR is also home to the Inter-University Consortium for Political and Social Research, which maintains the world's largest computerized social science data archive.
