Consumer sentiment rises as tariff concerns ease

Consumer sentiment increased for the first time in six months in June amid easing perceived impacts from tariffs, according to the University of Michigan Surveys of Consumers..The sentiment index increased 16 percent to 60.5 from 52.2 in May, but is still down 11.3 percent from June 2024. The index tracking current economic conditions increased 8 percent to 63.7 from 58.9 in May, but is still down 3.3 percent on an annualized basis. The index of consumer expectations increased 22 percent to 58.4 from 47.9 in May, but is down 16.1 percent from 69.6 in June 2024. “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,” said Surveys of Consumers Director Joanne Hsu. “However, consumers still perceive wide-ranging downside risks to the economy.” Year-ahead inflation expectations fell to 5.1 percent this month from 6.6 percent in May. Longer-term inflation expectations dropped for the second straight month, to 4.1 percent from 4.2 percent the previous month. Both are their lowest marks in three months. “Consumers’ fears about the potential impact of tariffs on future inflation have softened somewhat in June,” Hsu said. “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.” The Conference Board Consumer Confidence Index increased 12.3 points last month to 98.0 from 85.7 in April. The index based on consumers’ assessments of current business and labor market conditions increased 4.8 points to 135.9. The index tracking short-term outlooks for income, business and labor market conditions jumped 17.4 points to 72.8, which is still under the mark of 80, which signals an upcoming recession.About half of responses came after President Donald Trump announced a pause on some tariffs he imposed on imports from China. “Consumer confidence improved in May after five consecutive months of decline,” said Stephanie Guichard, senior economist of global indicators at The Conference Board. “The rebound was already visible before the May 12 US-China trade deal but gained momentum afterwards.”