Americans still upbeat about the economy, consumer sentiment survey shows


Bloomberg News/Landov

Shoppers can’t beat the heat, but they are still fairly optimistic about the economy.

The numbers: A measure of consumer confidence rose slightly in July and clung near a 15-year peak even in the face of rising economic headwinds that are likely to spur the Federal Reserve to cut interest rates in a few weeks.

The consumer sentiment survey edged up to 98.4 this month from 98.2 in June, according to a preliminary reading from the University Michigan. Economists surveyed by MarketWatch had forecast a reading of 99.0.

Just a little over a year ago, the index touched 101.4 to mark the highest level since 2004.

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What happened: A gauge that measure what consumers think about their own financial situation and the current health of the economy slipped to 111.1 from 111.9.

Yet another measure that asks about expectations for the next six months advanced to 90.1 from 89.3.

Put another way, Americans are a bit less optimistic right now, but they expect the economy to improve slightly in the near future. The juxtaposition likely reflect a recent flareup in trade tensions with China and Mexico that have since died down.

One interesting note: Consumers see slightly lower inflation in the year ahead, but somewhat higher inflation further out.

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Big picture: Consumer spending represents about 70% of what happens in the U.S. economy and Americans have lots of reasons to feel pretty good. Incomes are rising, layoffs and unemployment are near a 50-year low and plenty of jobs are available. Stock markets are also hitting record highs and interest rates have fallen.

These forces have kept at bay growing worries about a weaker U.S. manufacturing sector, ongoing trade fights and a tepid global economy.

What they are saying? “The headline index has been in the high 90s for most of the past two-and-a-half years, occasionally pushed off-course by market events and other one-time factors, but mostly quite stable and high enough to signal robust growth in spending,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Market reaction: The Dow Jones Industrial Average

DJIA, +0.22%

and S&P 500 index

SPX, +0.09%

rose in Thursday trades and stood at or near record highs.

The 10-year Treasury yield

TMUBMUSD10Y, +1.27%

was little changed at 2.06%.

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