Consumer sentiment about the U.S. economy is showing modest improvement, according to new preliminary data released Friday from the University of Michigan.
The July reading marks the highest level in five months, though it remains well below where it stood at the end of last year.
"We're seeing a consumer that's saying, I'm feeling okay, but still a little bit shaky. And I want a little more certainty about where the economy is going before I really get strong again," Rebecca Homkes said.
Homkes, who teaches at the London Business School, explains that consumer sentiment serves as a key indicator for economic forecasting.
"One of our best leading indicators of the stuff that really matters for making decisions is how the consumer's feeling. Because if they feel strong, they spend that goes through the economy when they feel more pessimistic about their jobs or spending, they spend less, and that starts to loop through the economy," Homkes said.
Despite these cautious feelings, Americans continue to spend. More data released this week shows retail sales rose more than 0.5% in June compared to May.
Most Americans consider the economy their top priority issue, and many are now focused on the Federal Reserve's next interest rate decision scheduled for July 30.
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While one Fed board member advocated for a rate cut at the upcoming meeting, most other members have supported maintaining current rates.
Meanwhile, Americans remain divided over the potential impact of the massive new tax and spending legislation passed by Republicans.
"I have a feeling that this new bill, regardless of the good and bad in it, is going to make this country great in the next three plus years," Walter Volinski, a retiree, said.
"I don't like that it continues to support the billionaires instead of the working-class people of America," said small business owner Maegan Zielinski.
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About two-thirds of U.S. adults believe the legislation will primarily benefit the wealthy. While Democrats were more likely to hold this view, nearly half of Republicans expressed the same opinion.
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