Consumer confidence bounces upward in June

Key Points

• University of Michigan’s preliminary consumer sentiment index rose to 60.5 in June from 52.2 in May—the first gain in six months but still down 18% from December 2024.
• Consumers’ one-year inflation expectations eased to 5.1% from 6.6% in May, although they remain well above the 3.3% forecast in January.
• Renewed optimism is linked to reduced trade tensions after a tariff truce with China and the US opting for talks over threatened 50% European tariffs.
• Despite the uptick, consumers are “extremely cautious” about the future, suggesting persistent wariness about the overall economy.

As worries about President Trump’s trade policies diminished and anxieties about an impending economic upheaval diminished, American consumers showed renewed optimism in June. However, sentiment is still far from strong, indicating continued apprehension about the overall state of the economy.

The preliminary consumer sentiment index from the University of Michigan increased from 52.2 in May to 60.5 in June. After a four-month decline and a period of stabilization in May, this is the first increase in six months. Nonetheless, sentiment is still about 18% lower than it was in December 2024, when confidence spiked following the election. Economists were surprised by June’s reading. A reading of 54 was predicted by a Wall Street Journal survey.

Consumer confidence and sentiment bounces upward in June

Expected inflation also decreased, according to consumers. From a 6.6% increase in May, they now predict a 5.1% price increase over the next year. This is still much higher than the 3.3% forecast for January, though.

The data shows that Americans are beginning to adapt to recent trade developments, said Joanne Hsu, director of the Surveys of Consumers. “Consumers are settling in from that initial shock—there’s some relief that their worst fears haven’t come to pass, and they’re recalibrating,” Hsu said. At the same time, “they’re still extremely cautious about the future,” she added.

Following a brief tariff truce between the United States and China, the survey was carried out from May 27 to June 9. That agreement seemed to calm consumers, and both countries are now thinking about reviving it. At about the same time, Trump decided to start trade talks rather than enact the 50% tariff he had threatened on European imports.

A federal trade court temporarily overturned Trump’s global tariffs during the survey period, finding that he had overreached himself. Later, they were temporarily reinstated by an appeals court, and this week, more extensions were announced.

The worst of consumer pessimism may be over, according to Tom Simons, chief U.S. economist at Jefferies. “I think this is a pretty significant sign that the worst—the peak pessimism—is behind us,” he said.

Economists are still keeping a careful eye on inflation expectations and sentiment since these factors can affect actual economic activity. Businesses may raise prices in anticipation of higher inflation, while consumers may demand higher wages.

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