The gauge of future expectations declined to 80.5, less than a preliminary reading of 80.2 and compared to 83.9 reported in June. In contrast, the barometer for current economic conditions edged up to 113.4 from a preliminary of 113.2 and 112.5 in June.
Americans expect the inflation rate to be 2.6 percent next year, below 2.7 percent in the initial estimate and compared to 2.6 percent in June. The 5-year expectation was unrevised at 2.6 percent compared to 2.5 percent in the previous month.
While current conditions were judged strictly on the performance of the economy, expectations continue to be significantly influenced by partisanship. The difference on the Expectations Index between Democrats and Republicans was 45 Index-points (63.7 versus 108.7). Among Independents, in contrast, the Expectations Index was exactly equal to the weighted difference between the partisan extremes (80.5). Importantly, the partisan gap has narrowed in the past six months, mostly due to Republicans tempering their optimism. The recent declines among Republicans were somewhat predictable, but the maintenance of extreme pessimism among Democrats is more surprising.