U.S. consumer sentiment jumped to the highest level in nearly two years in July as inflation subsided and the labor market remained strong, a survey showed Friday.

The University of Michigan's preliminary reading on the overall index of consumer sentiment came in at 72.6 this month, the highest reading since September 2021, compared to 64.4 in June. Economists polled by Reuters had forecast a preliminary reading of 65.5.

"Sentiment climbed for all demographic groups except for lower-income consumers," said Surveys of Consumers Director Joanne Hsu in a statement. "The sharp rise in sentiment was largely attributable to the continued slowdown in inflation along with stability in labor markets."

The survey's reading of one-year inflation expectations inched up to 3.4% this month from 3.3% in June. Its five-year inflation outlook nudged up to 3.1% from 3.0% in the prior month, remaining within the narrow 2.9-3.1% range for 23 of the last 24 months.