Slower inflation is boosting Americans' sentiment about the economy CNN Business

Washington
CNN
–

Americans are feeling a greater sense of optimism about the US economy this month due to slower inflation. Voters also see the possibility that Vice President Kamala Harris will defeat former President Donald Trump in the November election.

The University of Michigan's latest consumer survey, released Friday, showed Americans' attitudes toward the economy improved significantly this month, up 2% from August, according to a preliminary reading. It broke a month-long spell of consumer sentiment that had been mostly flat, barring a slight increase last month. Sentiment is now 40% higher than the record low reached in June 2022, when inflation was running red hot, but still remains below pre-pandemic levels.

“Consumer sentiment rose to its highest reading since May 2024, increasing for the second straight month and up nearly 2% over August,” Joan Hu, director of the university's Survey of Consumers, said in a release. “The gain was driven by improved purchasing conditions for durable goods, driven by more favorable prices perceived by consumers.”

The poll also noted that “a growing share of both Republicans and Democrats now expect Harris to win,” as Harris and Trump went toe-to-toe during their first presidential debate Tuesday, hosted by ABC.

US consumers also felt more optimistic about the future of inflation. Year-to-date inflation expectations fell for the fourth-straight month in September, according to the report, reaching its lowest reading since December 2020.

The U.S. economy has obviously loomed large this election season, from the nation's housing affordability crisis to the state of inflation — and it was the first topic of discussion during this week's Harris-Trump debate. How the economy develops between now and early November, when voters go to the polls, could shape voters' perceptions.

Inflation has fallen significantly from a 40-year peak in the summer of 2022, and after a rough patch earlier this year, it stood at an annualized rate of 2.5% through August, according to the latest consumer price index. The personal consumption price index, which the Federal Reserve uses for its official 2% inflation target, has similarly eased price pressures over the past two years. Price increases across the board have slowed significantly from two years ago, especially for petrol — which plays a prominent role in influencing consumer perceptions of prices.

“If consumers focus on the steady rise in prices over the past four years, that's Trump's favor. But as we see progress toward getting inflation down to 2%, the Fed's goal, it's tilting voter perception in favor of Harris,” Ryan Sweet, chief U.S. economist at Oxford Economics, told CNN in an interview.

Both Trump and Harris pitched to voters jaded by high inflation and high interest rates.