The one-year inflation outlook slid from 5% in June to 4.4% in July – down from a peak of 6.6% in May. Longer-term expectations over five years also fell to 3.6%, a decline of 0.4 percentage points. While those numbers still reflect consumer caution, they represent a major step back from the edge.

Consumer sentiment inches upward.

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Additionally, the University of Michigan’s sentiment index – which measures how consumers feel about the economy, their personal finances, and future outlook – edged up to 61.8 in July, a 1.8% increase from June.

Michigan’s consumer confidence has been battered by economic whiplash over the last several years, including pandemic disruptions, price spikes, and most recently, tariff threats. The survey shows that while people in the state remain wary of price instability, there’s growing optimism that the worst may be behind them.

Easing inflation fears offer hope for Michigan’s price-sensitive economy.

Economists see the trend as a good sign. “Despite risks of rising consumer inflation in the next few months, consumers have well-anchored expectations that tariff inflation will be temporary, and that conditions should improve by the time we enter 2026,” said LPL Financial Chief Economist Jeffrey Roach. “Inflation expectation is an important factor for the Fed and according to this report, the trajectory looks encouraging.”

For a state like Michigan – home to a major manufacturing base and a population acutely sensitive to consumer prices – this softening in inflation expectations could be the first real hint of economic relief.