US Consumer Sentiment Rebounds in July, but High Everyday Prices Still Squeeze Households

US consumer confidence edged higher in July as inflation expectations eased, yet households remained under strain from elevated prices for essentials such as groceries, housing and utilities.

Americans entered the second half of the year with a more stable view of the economy, but the improvement in sentiment has not offset concerns about everyday costs.

The Conference Board's Consumer Confidence Index, a closely watched measure of consumer views on the economy, fell slightly to 90.8 in July from an upwardly revised 92.2 in June. The decline followed earlier gains, while separate surveys showed consumers remained focused on the impact of higher prices on household finances.

Deloitte, the global professional services firm, found that essential spending remained elevated as consumers continued prioritising necessities over discretionary purchases. Its latest State of the US Consumer report said inflation reached 4.2 per cent in May, the highest level in nearly three years.

Consumer Confidence Remains Below Recent Highs

The Conference Board said consumer confidence moderated in July after improving earlier in the year.

The Present Situation Index, which measures consumers' assessment of current business and labour market conditions, fell 3.6 points to 114.9, marking its third consecutive monthly decline.

The Expectations Index, which tracks consumers' outlook for income, business conditions and employment over the next six months, remained unchanged at 74.7.

Dana M. Peterson, chief economist at The Conference Board, said, 'Consumer confidence moderated slightly in July, continuing a general downward sloping trajectory since late 2021.'

She said consumer views of current business conditions and the labour market had weakened, while expectations for future conditions remained cautious.

Easing Price Pressures Provide Some Relief

The improvement in consumer sentiment earlier in the summer came as some inflation concerns eased.

The University of Michigan's Surveys of Consumers showed sentiment rose in July from earlier lows, helped by lower inflation expectations and easing pressure from fuel prices.

The survey's preliminary July reading showed consumers expected inflation of 4.2 per cent over the next year, down from 4.6 per cent in June. Long-term inflation expectations remained unchanged at 3.3 per cent.

Joanne Hsu, director of the University of Michigan Surveys of Consumers, said sentiment reached its highest level since February after easing price pressures at the pump.

However, she added that consumers remained cautious because prices were still elevated, with sentiment down from a year earlier.

High Prices Continue To Shape Household Budgets

Despite improving sentiment readings, affordability remained a major concern for consumers.

The Conference Board said mentions of prices continued to feature heavily in consumer responses, with references to food and grocery costs increasing in July.

Deloitte's research showed similar pressure. About 75 per cent of consumers expected gas prices to rise, while 74 per cent expected higher grocery bills.

The figures reflect the gap between slower inflation and lower prices. While inflation has cooled from previous peaks, many households continue to pay more for everyday goods and services than they did before the recent period of price increases.

Consumers Remain Cautious On Discretionary Spending

Higher essential costs have continued to influence spending choices.

Deloitte found that spending intentions for non-essential purchases improved for a third consecutive month in June, but remained below 2021 levels.

Essential spending categories, including housing, utilities and groceries, continued to account for a larger share of household budgets.

The US Bureau of Labor Statistics reported that consumer prices increased 3.5 per cent in the year to June 2026, while core inflation, which excludes food and energy, rose 2.6 per cent.

Energy costs helped slow the pace of overall inflation, but housing and food remained important contributors to household expenses.

Households Retain Cautious Economic Outlook

The latest consumer data points to a gradual improvement in sentiment rather than a broad return of confidence.

Americans have become less pessimistic about economic conditions, but household decisions remain shaped by the higher cost environment.

Consumer spending remains a key measure of economic strength, with businesses and policymakers watching whether improving confidence can translate into stronger demand in the months ahead.