(Reuters) -U.S. consumer sentiment ticked further up in August from a record low earlier this summer, and American households' near-term outlook for inflation eased again on the back of tumbling gasoline prices, a survey released on Friday showed.
The University of Michigan's preliminary August reading on the overall index on consumer sentiment came in at 55.1, up from 51.5 in the prior month. It had hit a record low of 50 in June.
The preliminary August reading was above the median forecast of 52.5 among economists polled by Reuters.
While the survey's barometer of current economic conditions fell unexpectedly to 55.5 from 58.1, its gauge of consumer expectations shot up to 54.9 from 47.3, with the 16.1% increase from July standing as the largest percentage jump since 2009.
"All components of the expectations index improved this month, particularly among low- and middle-income consumers for whom inflation is particularly salient," survey director Joanne Hsu said in a statement.
Indeed, the survey's one-year inflation expectation fell to a six-month low of 5.0% from 5.2%, while its five-year inflation outlook edged up to 3.0% from 2.9%, holding within a range that has prevailed for the past year.
After hitting a record high above $5 a gallon in mid-June, the average U.S. gasoline price has now fallen by more than 20% to back below $4 a gallon, according to AAA. Gas prices are influential in consumers' view of inflation and of their overall sentiment about the economy.
In early June, with gas prices still marching toward their peak, consumers in the survey had initially signaled they saw inflation over the next five years averaging 3.3%, the highest outlook over that time horizon since 2008, and a reading that startled officials at the Federal Reserve.
Fretting that longer-run inflation expectations might have started to become unanchored, a daunting prospect in their battle to bring down the highest inflation rate in four decades, the Fed decided to raise interest rates that month by an outsized three-quarters of a percentage point and matched that again in July.
Friday's reading from the University of Michigan survey dovetails in part with one released on Monday from the New York Federal Reserve and may offer another reason for the Fed to consider dialing back the size of interest rate increases. That survey showed inflation expectations at both the one-year and three-year horizons falling notably.
The Michigan survey, however, also showed policymakers have more work to do on the inflation front.
"Uncertainty over long-run inflation receded a bit," Hsu said. "Still, the share of consumers blaming inflation for eroding their living standards remained near 48%."