United States consumer sentiment climbed to a five-month high in July, though the improvement may prove short-lived as renewed conflict in the Middle East pushes fuel prices higher and threatens to weigh on household confidence.
The University of Michigan's Surveys of Consumers said its Consumer Sentiment Index rose to 54.4 in July, the highest reading since February, from a final reading of 49.5 in June.
Markets had expected the index to increase to 51.0.
The survey was conducted between 23 June and 13 July, with more than 70% of responses collected before the collapse of the U.S.-Iran ceasefire last week, which sent oil prices to a one-month high and lifted petrol prices.
"This month's rise in sentiment was pervasive across the population, seen across groups by age, income, wealth, and political party," said Joanne Hsu, the director of the Surveys of Consumers.
"However, with prices remaining frustratingly high, consumers are hardly ebullient about the economy; sentiment is down 12% from a year ago. Thus, sentiment’s upward momentum may prove difficult to sustain if recent declines in gas prices continue to reverse course."
Consumers' one-year inflation expectations eased to 4.2% in July from 4.6% in June, while five-year inflation expectations were unchanged at 3.3%.
The figures follow government data released earlier this week showing U.S. consumer inflation moderated in June.
Meanwhile, in a separate release, the U.S. housing market continued to lose momentum as elevated mortgage rates and a large inventory of unsold homes discouraged new construction.
Single-family housing starts, which account for the majority of residential construction, fell 0.2% in June to a seasonally adjusted annual rate of 895,000 units, according to the Commerce Department's Census Bureau.
Construction activity declined in the Northeast, South and Midwest, though it increased in the West. Compared with a year earlier, single-family housing starts were down 3.2%.
Building permits for future single-family homes fell 2.4% to an annual rate of 871,000 units, the weakest level since August 2025 and 0.2% lower than a year earlier, signalling subdued construction activity in the months ahead.
Builders continue to face higher land and material costs, while elevated borrowing costs have kept many prospective buyers on the sidelines.
Industry participants also expect it will take time before recently passed bipartisan housing affordability legislation translates into increased construction activity.
