US consumer sentiment hit its highest level since February amid easing price pressures at the pump, tough renewed tensions in the Middle East could weigh on confidence going forward, preliminary results of a University of Michigan survey showed Friday.
The main sentiment index rose 9.9% sequentially to 54.4 in July. The consensus was for a 51 print in a Bloomberg poll.
"With the second straight month of 10% jumps, consumer sentiment climbed to its highest reading since February of this year on the basis of easing price pressures at the pump in recent weeks," Surveys of Consumers Director Joanne Hsu said. "All five index components improved, led by significant 20% increases in buying conditions for durables, as well as year-ahead business conditions."
US retail gasoline prices averaged $3.981 per gallon Friday, compared with $3.884 a week ago and $4.025 a month ago, according to data from AAA, a travel organization that tracks fuel prices in the country.
A majority of interviews in the latest University of Michigan survey were completed before the resumption of US strikes against Iran earlier this month and the subsequent rise in gas prices, according to Hsu.
"With prices remaining frustratingly high, consumers are hardly ebullient about the economy," Hsu said. "Thus, sentiment's upward momentum may prove difficult to sustain if recent declines in gas prices continue to reverse course."
Crude prices plunged in May and June, but have rallied this month as tensions between the US and Iran escalated, potentially putting their preliminary peace deal at risk.
The gauge for current economic conditions surged 15% month over month to 54.9 in July, while the expectations index rose 6.5% sequentially to 54, the University of Michigan survey showed.
The year-ahead inflation outlook declined to 4.2% from 4.6%, while the five-year forecast remained steady at 3.3%, according to the report.
