Rob WileThe University of Michigan's monthly Consumer Sentiment Index hit 72.6 for July — the highest reading since September 2021.
"Even though many consumers are still bracing for a possible downturn up ahead, they've noticed how inflation has cooled, and upgraded their views," she said. But inflation isn't the only consideration: The strong labor market is also helping bolster sentiment, Hsu said. At 3.6%, unemployment is at historic lows. The so-called Misery Index, which adds the unemployment rate to the inflation rate, is now approaching pre-pandemic levels.
Political affiliation is one the strongest determinants of views of the economy, Hsu said — with the Michigan index now at 96.7 among Democrats compared with 49.3 among Republicans .