Consumer Sentiment Rose 10% in July as Gas Prices Already Reversed

US consumer sentiment jumped 9.9% in July to a preliminary reading of 54.4, its highest level since February, the University of Michigan said Friday. It is the second straight month of double digit gains, and cheaper gasoline gets most of the credit.

But the survey window closed before the war between the United States and Iran flared up again. Pump prices had already started climbing by the time the number came out Friday. This is not the first time the calendar has flattered this report, and Friday’s release carries the same warning sign that undercut two earlier readings this year.

Sentiment Jumps to a Five-Month High

The index climbed from a final June reading of 49.5, which was itself a 10.5% jump off May’s record low of 44.8, according to the University of Michigan’s Surveys of Consumers. Economists polled by Reuters had forecast a more modest reading of 51.0.

Joanne Hsu, director of the Surveys of Consumers, said the improvement was “pervasive across the population, seen across groups by age, income, wealth, and political party.” Year-ahead inflation expectations eased too, slipping to 4.2% from 4.6% in June, though that is still well above the 3.4% consumers expected back in February, before the war began.

Even with two straight months of sharp gains, sentiment is still 12% below where it stood a year ago, Hsu noted, adding that “with prices remaining frustratingly high, consumers are hardly ebullient about the economy.” Records stretching back to the late 1970s, tracked by the Federal Reserve Bank of St. Louis, show June’s reading ranked among the two lowest ever recorded, and July’s rebound only partly claws that back.

The Survey Closed Before the Ceasefire Did

The preliminary July survey ran from June 23 to July 13. More than 70% of interviews were finished before the ceasefire between Washington and Tehran collapsed and the United States resumed strikes on Iran on July 7, hitting roughly 90 targets the following day.

Gas prices had been falling through most of that window, dropping under $3.80 a gallon in early July from a spring peak of $4.56 on May 21. Then the trend flipped. The national average climbed to $3.94 by July 16, and diesel topped $5 a gallon again, according to AAA’s daily price tracking, which also put pump prices roughly 26% above year ago levels.

Hsu flagged the risk herself, in the same release that produced Friday’s headline number.

Thus, sentiment’s upward momentum may prove difficult to sustain if recent declines in gas prices continue to reverse course.

That is Hsu, writing as part of the University of Michigan’s official commentary on the very data that just showed a five-month high.

This War Has Fooled the Survey Before

The war began on February 28, when the United States and Israel launched strikes on Iran. Twice since then, the survey’s timing has collided with the fighting’s timing, and both times the initial reading did not hold.

In the war’s first weeks, Hsu described exactly this kind of reversal happening in real time. Early responses that month showed an improvement from the prior survey, she said, “but lower readings seen during the nine days thereafter completely erased those initial gains,” according to an NBC News analysis of the war’s early economic toll.

Then came April. That month’s survey closed just before President Trump announced a temporary ceasefire, and Hsu said sentiment would likely improve once consumers saw the fighting had actually stopped. It did not play out that way. The truce cracked, gasoline kept climbing, and May delivered the record low of 44.8 instead of the recovery she had described. July’s number now carries the identical setup: good news baked into the math, bad news arriving right after the last phone call was logged.

Who Feels the Ceasefire Collapse Most?

Lower income drivers and residents of a handful of high-tax, high-demand states are absorbing most of the pain from renewed fighting, since fuel eats a bigger share of tighter budgets and price swings have hit some regions far harder than others. Wealthier households, by contrast, have leaned on stock portfolios that mostly kept climbing even as gas prices spiked.

The University of Michigan’s own breakdown of who credits the stock market for their improved mood shows how uneven that cushion is:

• Top tercile of stockholders: 28% cited favorable asset values as a reason for their improved outlook, the highest share since January 2025.
• Middle tercile: Only 8% said the same.
• Bottom tercile of stockholders: Just 4% credited market gains, leaving gasoline as the dominant swing factor in their mood.
• Lower income and non college households: Posted the steepest declines when prices spiked in the spring, and some of the sharpest rebounds once prices eased.

Geography compounds the gap. In the war’s first two months, an analysis from the Center for American Progress found Utah, Idaho, Tennessee, Mississippi and Kentucky saw the sharpest percentage increases in gas prices of any states, even though the coasts still pay the highest prices in raw dollar terms.

Spending Still Beats Sentiment as a Signal

Retail spending grew just 0.2% in June, according to Commerce Department data. Strip out the effect of higher gas prices, since the figures are not adjusted for inflation, and spending rose a sturdier 0.7% that month.

Sentiment has not been a reliable predictor of consumer spending in recent years, and economists watch the job market instead. The unemployment rate held at a low 4.2%. New unemployment filings tell a similarly calm story: initial jobless claims fell to 208,000 for the week ending July 11, down 8,000 from the week before, according to Labor Department claims data. A separate gauge, the insured unemployment rate, held at 1.2%, with continuing claims near 1.8 million.

None of those numbers show a labor market that is cracking. As long as paychecks keep arriving, economists expect spending to hold up even when consumers say they feel lousy about the broader economy.

Refinery Damage Could Keep Gas Prices High Regardless

Even if the ceasefire is restored, relief at the pump is not guaranteed. Iran’s war damaged or destroyed roughly 30 refineries across the Middle East, and global refining output fell by 3 million barrels at the peak of the disruption, with 2.1 million barrels of capacity still offline, according to Natasha Kaneva, chief commodities economist at JPMorgan, cited in a CNN Business analysis of refinery crack spreads.

Crack spreads, the profit margin refiners earn turning crude into finished fuel, are up 60% from a year ago for gasoline and more than double last year’s levels for diesel and jet fuel. US refineries ran at 96% of capacity last month to fill the gap, and extreme summer heat can make that even harder to sustain, since refineries need cool conditions to process crude efficiently. President Trump has publicly pressed oil companies to cut pump prices faster than crude costs alone would justify, a tension those record margins only sharpen.

The final July sentiment reading is due July 31. By then, none of the interviews will have been completed before the ceasefire fell apart, and the number will be the first of this stretch of the war to fully reflect it.

Frequently Asked Questions

How is the University of Michigan consumer sentiment index calculated?

The index surveys US households on current finances, business conditions and buying plans, and expresses the result against a base of 100 set in the first quarter of 1966. The University of Michigan publishes two reports a month, a preliminary release around mid month and a final release at month’s end that can revise the number in either direction.

How does the Michigan index differ from the Conference Board’s confidence index?

The two track similar ground but weigh different inputs. The Conference Board’s Consumer Confidence Index, which rose to 91.2 in June from 90.6 in May, leans more heavily on employment and labor market conditions, while the Michigan index is built more around household finances and inflation.

Has consumer sentiment ever been this low before a recession hit?

Not by this measure. An analysis by the financial research site Advisor Perspectives found June’s final reading of 49.5 sat below the index’s level at the start of every one of the six recessions recorded since the survey began, underscoring how unusual this stretch of readings has been even before July’s partial rebound.

Why do gas prices move consumer sentiment so much more than other costs?

Gasoline is one of the few prices Americans see and pay attention to almost daily, posted in large numbers at every intersection, which makes it an immediate and visible gauge of household budgets in a way that grocery bills or rent increases are not.