The University of Michigan's consumer sentiment index has risen to 69.0 in September, marking an increase from 67.9 in August and surpassing expectations of 68.3.

This September reading is the highest since May 2023 and reflects a sentiment that is approximately 40% above its low point in June 2022.

Consumer sentiment had plummeted in June 2022 when inflation peaked at 9.1%, but has since increased significantly, although it remains below pre-pandemic levels.

Americans' outlook on the economy improved for the second consecutive month in September, driven by falling prices of durable goods and expectations of interest rate cuts by the Federal Reserve.

The proportion of consumers expecting interest rates to decline in the next 12 months rose to 54%, the highest level recorded since 1978.

Despite the positive sentiment, concerns are rising as Americans are saving less and accumulating more credit card debt, which may lead to a reduction in spending.

Year-ahead inflation expectations decreased for the fourth consecutive month, falling to 2.7%, the lowest since December 2020.

Joanne Hsu, director of consumer surveys at the University of Michigan, noted that consumers are still cautious due to uncertainties surrounding the upcoming election.

The economy expanded at a strong annual rate of 3% in the April-June quarter, with retail spending rebounding in July.

Overall, Americans are showing increased optimism about the US economy this month due to slower inflation rates and improved economic conditions.

A growing number of consumers, across political lines, anticipate a victory for Kamala Harris in the upcoming election, indicating a shift in political sentiment.

Rising consumer confidence may indicate a greater willingness to spend, yet Americans have maintained healthy spending levels even with subdued confidence.