By Hiranmayi Srinivasan, Associate Editor

What's Happening Today

In a sign that Americans are starting to feel more optimistic about their personal finances and the economy as inflation begins to cool, an index of consumer sentiment edged higher this month, according to the University of Michigan's preliminary Consumer Sentiment Index released this morning.

The index rose to a score of 55.1 in August, up from last month's 51.5, as consumers' expectations for the year ahead improved and energy prices eased. The national average price at the pump for a gallon of gas fell below $4 for the first time since early March yesterday, and is now at $3.98, according to data from AAA.

However, the index still has a way to go before recovering to pre-pandemic levels, lingering near June's record low that was stoked by inflation concerns. In August, close to half of consumers still said that rising prices are impacting their standard of living. A recent survey by The Balance found that more than one-third of U.S. adults were reconsidering major milestones such as buying a house or a car because of inflation.

Those who have purchased a house are staying on top of their mortgage payments, according to a report by the Mortgage Bankers Association (MBA). The mortgage delinquency rate tracked by the MBA dropped to 3.64% in the second quarter of 2022—the lowest level since the MBA started collecting data in 1979. And that tracks with the way unemployment is going, hitting a record low in July.

The U.S. unemployment rate is usually the best indicator of whether people are able to pay their loans, according to MBA's vice president of industry analysis, Marina Walsh.

- Hira

Editors' Picks

House Is Set to Pass Climate, Tax and Health Package (The New York Times)

Falling Gas Prices Buoy Consumer Sentiment, Temper Inflation Expectations (MarketWatch)

What Are the Major Causes of Inflation? (The Balance)

Bidding Wars Are Fading in US Homebuying With Market Cooling Off (Bloomberg)

Mortgage Rates by Credit Score (The Balance)

The US Postal Service Is Raising Rates for the Holidays (CNN)

U.S. Opens Probe Into 1.7 Million Ford Vehicles Over Brake Hose Recall (Reuters)

Term of the Day

Consumer Sentiment Index

Consumer sentiment indexes are leading economic indicators that measure changes in the outlook for the economy. They are based on how shoppers feel about their interest and willingness to buy things in the future. In most cases, the researchers who calculate the indexes interview panels of consumers.

One of the best-known of the U.S. consumer sentiment indexes is based on the University of Michigan Surveys of Consumers, which have been conducted since 1946.

Off the Charts

Consumer sentiment is considered to be a leading index, meaning it shows what is likely to happen in the future. It helps economists and policymakers think about what retail demand and savings rates will be, and how that can translate to things such as prices and employment.

On Monday, August 15 at 2 p.m. EST, join us on IG live for a discussion with The Balance Editor-in-Chief Kristin Myers and Nikki Merkerson, Founder of PairGap and Urban Leisure, on buying a home as a single woman. Follow us on Instagram to get updates on The Balance's live events this month!