American consumer confidence rose to its highest level in five months at the start of July, lifted by a decline in gasoline prices.

A preliminary survey released Friday by the University of Michigan showed the consumer sentiment index for July increased to 54.4 from 49.5 in June, surpassing economists' forecasts.

Gasoline prices continued to fall through June and early July, helping to ease pressure on household budgets. However, with renewed conflict in the Middle East, pump prices have recently begun to climb again, reintroducing uncertainty to the inflation outlook.

The survey captured responses collected between June 23 and July 13. The report noted that over 70% of the questionnaires were completed before U.S. airstrikes in Iran in early July. The improvement in consumer sentiment was observed across all age, income, and political groups.

Consumers anticipate prices will rise by 4.2% over the next year, a smaller increase than the 4.6% expected in June. Their expectation for the annual inflation rate over the next five to ten years held steady at 3.3%, matching the June figure.

"Consumers continued to express concerns that inflation pressures could reemerge in the future," survey director Joanne Hsu said in a statement. "An increasing share of consumers believe that now is a good time to buy things they want before prices may rise."

The survey indicated households' views of both their personal finances and the broader economic situation improved. The index for buying conditions for durable goods climbed to its highest level since October of last year.

The cost of living remained the primary source of dissatisfaction for American consumers. Although data released earlier in the week showed U.S. consumer prices in June posted their largest drop since the pandemic, the overall inflation level remains elevated.

The current conditions gauge rose to a four-month high of 54.9. The expectations index increased to 54, reaching its highest level since February of this year.