US consumer sentiment rose sharply in June to a four-month high and inflation expectations improved notably as concerns eased about the economic outlook and personal finances.
The final June sentiment index increased to 60.7 from 52.2 a month earlier, according to the University of Michigan. The 8.5-point increase was the largest since the start of 2024. The median estimate in a Bloomberg survey of economists called for no change from the preliminary reading of 60.5.
“The improvement was broad-based across numerous facets of the economy,’’ Joanne Hsu, director of the survey, said in a statement. “With the recent moderation in both tariff levels and trade policy volatility, consumers now appear to believe that their worst fears may not come to pass and have moderated their expectations accordingly.”
Consumers expect prices to rise 5% over the next year, data released Friday showed. That is down slightly from the preliminary reading. It's also far better than the 6.6% registered in May -- the biggest monthly improvement since 2001. They saw costs rising at an annual rate of 4% over the next five to 10 years, also lower than a month earlier.
The survey, which concluded two days after US military conducted airstrikes on Iran, showed very few respondents made spontaneous mentions of the Israel-Iran conflict. However, consumers remain anxious about the potential impact of tariffs.
Consumer sentiment that is still weaker than at the start of the year has coincided with softer demand. Separate figures out earlier showed inflation-adjusted spending declined in May for the first time since the start of the year.
The latest data suggest sluggish household demand, especially for services, extended into May after the weakest quarter for consumer spending since the onset of the pandemic.
“Consumer views are still broadly consistent with an economic slowdown and an increase in inflation to come,” Hsu said.
Consumers’ view of the job market improved, though 57% of respondents still expect unemployment to rise in the coming year.
A separate survey from the Conference Board on Tuesday found consumer confidence declined in June on concerns about the labor market. The report showed the share of consumers that said jobs were plentiful dropped to a four-year low. Meanwhile, recurring jobless claims, a proxy for those receiving unemployment benefits, stand at the highest level since late 2021.
Richmond Fed President Tom Barkin said Thursday that in coming months, businesses may face pressure to raise prices due to higher tariffs -- potentially triggering consumer pushback and, in turn, layoffs.
“If businesses lose volume when they raise prices, they will need to reduce costs. If they lose margin because they are unable to raise prices, they too will need to reduce costs,’’ he said. “Either way, cost reduction would likely mean headcount reduction, suggesting that the current low hiring, low firing environment might come under threat.’’
The Michigan survey showed the current conditions gauge rose to 64.8 from 58.9, while the expectations index climbed to 58.1 from 47.9 in May.
Sentiment improved along political lines. A gauge of sentiment among Republicans increased to the highest level since October 2020. Confidence among Democrats rose to a four-month high.
A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out some of our webcasts.
Bloomberg News provided this article. For more articles like this please visit
bloomberg.com.
Read more articles by Nazmul Ahasan
