U.S. consumer sentiment held steady this week, with the Morning Consult Index of Consumer Sentiment (ICS) rising 1.1 points to reach 90.6 among adults. This resilience comes despite renewed geopolitical tensions in the Strait of Hormuz, which have triggered fresh concerns regarding global energy prices.
The latest Consumer Price Index (CPI) report for June provided some relief to households, coming in well below consensus expectations. Headline inflation fell 0.4 percent month over month, which brought the annual inflation rate down to 3.5 percent, below the 3.8 percent rate projected by analysts.
This downside surprise was driven primarily by the energy index, which slumped 5.7 percent in June following a brief reopening of the Strait of Hormuz. That brief window of stability ended when the ceasefire collapsed around July 10.
For now, these geopolitical developments have not shifted broader public outlooks. Morning Consult’s Indirect Consumer Inflation Expectations (ICIE) index eased 0.2 percentage points to 4.2 percent.
This suggests that the price implications of the renewed Hormuz blockade have not yet altered consumer expectations, though analysts note that the trend may shift if pump prices begin to climb in mid-July.
Meanwhile, near-real-time labor data showed modest improvements for the week ending July 11. Morning Consult’s unemployment index, a seasonally adjusted survey-based measure tracking joblessness, fell to 97.9 from 101.6 the previous week. The Pay Loss Rate also eased slightly, bringing the four-week moving average down to 12.5 percent.
This mixture of steady sentiment and improved labor indicators arrives just ahead of the Census Bureau’s June Advance Retail Sales report, scheduled for release on Thursday. Morning Consult’s proprietary spending data, which tracks nominal consumer spending across retail sectors, suggests a shift in purchasing patterns last month.
According to their data, nominal retail spending fell 2.3 percent month over month in June on a seasonally adjusted basis, reversing a 1.9 percent gain recorded in May. Gas spending fell 6.1 percent, a drop likely reflecting the cheaper pump prices in June during the brief ceasefire rather than a drop in actual consumer demand. Grocery spending also fell by 2.7 percent, alongside minor pullbacks across most other retail categories.
However, some service and discretionary categories offset these declines. Spending at restaurants rose 1.8 percent, while spending on alcohol climbed 4.5 percent.
While Morning Consult’s spending metrics do not align perfectly with the Census Bureau’s retail categories, the overall data indicates a cautious approach by consumers toward physical goods. If the situation in the Strait of Hormuz worsens and energy costs rise, pressure on discretionary spending categories may increase heading into late July.
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