In early June, consumer sentiment improved significantly, reflecting a more optimistic outlook on the economy and inflation, as reported by the University of Michigan’s Surveys of Consumers. The headline index of consumer sentiment rose to 60.5, surpassing Dow Jones estimates of 54 and marking a 15.9% increase from the previous month. The current conditions index increased by 8.1%, while future expectations surged by 21.9%. This shift coincided with a reduction in aggressive rhetoric regarding tariffs, particularly from President Trump, who initiated a 90-day negotiation period showing tangible progress with major trade partner China.
Joanne Hsu, the survey director, noted that consumer concerns had lessened since the announcement of high tariffs in April, although significant worries about economic risks remain prevalent. Despite the increase in sentiment, all indexes remained lower than year-ago figures, as consumers continue to fret over inflation linked to tariffs and other geopolitical issues. Notably, the one-year inflation outlook dropped to 5.1%, a significant decline, while the five-year outlook decreased slightly to 4.1%.
Hsu remarked that while fears of inflation due to tariffs have eased slightly in June, expectations remain above levels seen in the second half of 2024. The Michigan survey’s findings contrasted with other indicators, such as the Federal Reserve of New York’s report of a one-year inflation estimate falling to 3.2%. Moreover, recent figures from the Bureau of Labor Statistics indicated minimal monthly price increases, suggesting little immediate inflationary pressure from tariffs. As a result, there are calls from Trump and other officials for the Federal Reserve to lower interest rates, although market consensus anticipates no cuts until September.
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