Consumer sentiment may finally be recovering after falling to historic lows due to wartime price spikes. The University of Michigan’s latest survey of Americans showed that sentiment rose 9% to a preliminary reading of 48.9 early this month, the first increase since February, before the United States and Israel’s destabilizing war with Iran sent global energy prices surging.

Gas Prices Influence Sentiment

Gas prices, which heavily influence people’s perception of the economy, climbed in the several weeks after the war began, pushing sentiment down to a record low — twice. Gas prices have declined in recent weeks, which helped sentiment recover. Lower-income consumers exhibited a particularly strong sentiment increase, consistent with the fact that gasoline comprises a larger share of their budgets.

Sentiment is finally up from a level lower than anything seen during foreign wars, 9/11, the Great Recession, the pandemic, and any prior bouts of high inflation in the post-World War II era. But sentiment will likely remain in the dumps unless gas prices continue to fall meaningfully, likely requiring oil tankers to flow freely again through the Strait of Hormuz, a key chokepoint through which one-fifth of the world’s oil passes.

Years-Long Rough Patch

Sentiment is going through a years-long rough patch for a number of reasons, but it’s mainly due to the price shocks of recent years compounding to worsen affordability, though there are signs consumers may be getting used to it. Since 2020, Americans have endured several, back-to-back, historic events affecting the economy.

A separate quarterly survey from TransUnion released earlier this week showed that consumers’ optimism hadn’t wavered much from a year ago. However, the level of pessimism dropped, noted Charlie Wise, TransUnion’s head of global research and consulting. Inflation remained the top financial concern for consumers in the second quarter, rising to 50% from 47%, according to the credit bureau’s latest Consumer Pulse Survey.

Original reporting: El Paso News (HLL/CB) — read the source article.