U.S. consumer sentiment rebounds in June as inflation worries persist
Household confidence in the U.S. improves in June after falling to record lows in the prior month. Consumers still remain focused on the high cost of living, while short-term and long-term inflation expectations ease only modestly.
Highlights
- University of Michigan Consumer Sentiment Index rises to 49.5 in June from 44.8 in May, slightly beating the preliminary reading but missing the 50.0 forecast.
- Over half of consumers surveyed for the third consecutive month cite high prices as negatively impacting their personal finances, according to Joanne Hsu.
- One-year inflation expectations drop to 4.6% from 4.8% and five-year expectations slip to 3.3% from 3.9% in May, signaling persistently elevated price concerns.
June survey shows modest confidence recovery
As reported by Reuters, the University of Michigan's Surveys of Consumers says its Consumer Sentiment Index rises to a final reading of 49.5 in June from 44.8 in May. The latest figure is also slightly above the preliminary June reading of 48.9, though it comes in just below economists' forecast for 50.0 in a Reuters poll.Joanne Hsu, director of the Surveys of Consumers, says the cost of living remains central for households. She says that for a third straight month, more than half of consumers spontaneously mention high prices as a drag on their personal finances.
Inflation expectations stay elevated
The survey's measure of expected inflation over the next year falls to 4.6% in June from 4.8% in May. That reading is unchanged from earlier in the month, indicating that consumers still see near-term price pressures as high.Expectations for inflation over the next five years decline to 3.3% from 3.9% in May, compared with 3.4% earlier in June. The figures suggest sentiment is improving from extreme lows, but persistent concern over living costs continues to weigh on the broader consumer outlook.
In our earlier article on the Fed’s inflation fight under Chair Kevin Warsh, we explained how inflation stayed above target even as the central bank held rates steady and signaled a less dovish stance. We also noted that shifting energy prices and easing market-based long-term inflation expectations pushed investors to price in a higher chance of at least one rate hike, while political pressure for quick cuts appeared to soften.
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