Consumer sentiment increased in June for the first time in six months, the latest sign that Americans’ views of the economy have improved as inflation has stayed tame and tariff concerns lessen.
The preliminary reading of the University of Michigan’s closely watched consumer sentiment index, released Friday, jumped 16 percent to 60.5 from 52.2. The large increase followed steady drops that left the preliminary number last month at the second-lowest level in the nearly 75-year history of the survey. Consumer sentiment is still down 20 percent compared with December 2024 and off 11.3 percent year over year.
The university’s Current Economic Conditions index improved 8.1 percent to 63.7 in June from 58.9 in May and is off 3.3 percent year over year. The Index of Consumer Expectations jumped 21.9 percent to 58.4 from 47.9 in May but was down 16.1 percent year over year.
Joanne Hsu, the director of surveys, made the following comments:
“Consumer sentiment improved for the first time in six months, climbing 16 percent from last month but remaining about 20 percent below December 2024, when sentiment had exhibited a post-election bump. These trends were unanimous across the distributions of age, income, wealth, political party, and geographic region. Moreover, all five index components rose, with a particularly steep increase for short and long-run expected business conditions, consistent with a perceived easing of pressures from tariffs. Consumers appear to have settled somewhat from the shock of the extremely high tariffs announced in April and the policy volatility seen in the weeks that followed. However, consumers still perceive wide-ranging downside risks to the economy. Their views of business conditions, personal finances, buying conditions for big ticket items, labor markets, and stock markets all remain well below six months ago in December 2024. Despite this month’s notable improvement, consumers remain guarded and concerned about the trajectory of the economy.
“Year-ahead inflation expectations plunged from 6.6 percent last month to 5.1 percent this month. Long-run inflation expectations fell for the second straight month, stepping down from 4.2 percent in May to 4.1 percent in June. Both readings are the lowest in three months. Consumers’ fears about the potential impact of tariffs on future inflation have softened somewhat in June. Still, inflation expectations remain above readings seen throughout the second half of 2024, reflecting widespread beliefs that trade policy may still contribute to an increase in inflation in the year ahead.”
