In early June, consumer sentiment improved significantly, according to a University of Michigan survey, reflecting optimism about the economy and the potential easing of inflation concerns as progress appeared possible in the global trade war. The consumer sentiment index rose to 60.5, surpassing expectations of 54 and marking a 15.9% increase from the previous month. The index measuring current conditions rose by 8.1%, while future expectations jumped by 21.9%. This rebound coincided with a reduction in the aggressive rhetoric from President Trump regarding tariffs, following the announcement of a 90-day negotiation period that seemed to yield positive results, particularly with China.
However, despite the improvements, sentiment indexes remained below year-ago levels, as consumers continued to express concern about the effects of tariffs on prices and other geopolitical issues. Notably, the one-year inflation outlook fell to 5.1%, a decrease of 1.5 percentage points, while the five-year estimate dropped slightly to 4.1%. Joanne Hsu, the survey director, indicated that while fears surrounding tariff-induced inflation had eased somewhat, expectations remained higher than those seen previously in 2024.
The Michigan survey diverged from other indicators that suggested inflation fears were more contained, with a recent report from the Federal Reserve of New York showing a lower one-year outlook of 3.2%. Meanwhile, the Bureau of Labor Statistics reported minimal monthly increases in consumer and producer prices, indicating limited inflationary pressure from tariffs. This situation has led to calls from the White House for the Federal Reserve to lower interest rates, though expectations from markets indicate no cuts might occur until September. The Michigan survey will be updated later in the month.
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