The preliminary University of Michigan Consumer Sentiment Index for June came in at 63.9 (consensus 60.2) a four-month high versus the final reading of 59.2 for May. In the same period a year ago, the index stood at 50.0. The report showed an easing in year-ahead inflation expectations underpinned a pickup in consumer sentiment. The caveat is that the report noted that a majority of consumers still expect difficult times for the economy over the next year.
US consumer sentiment and inflation expectations data from the University of Michigan
- The preliminary University of Michigan Consumer Sentiment Index for June rose to 63.9 (consensus 60.2) versus the final reading of 59.2 for May. In the same period a year ago, the index stood at 50.0.
- Current conditions 68.0 vs 65.5 expected (64.9 prior)
- Expectations 61.3 vs 56.5 expected (55.4 prior)
- 1-year inflation 3.3% vs 4.2% prior — lowest since March 2021
- 5-10 year inflation 3.0% vs 3.1% prior
Surveys of Consumers Director Joanne Hsu:
Consumer sentiment lifted 8% in June, reaching its highest level in four months, reflecting greater optimism as inflation eased and policymakers resolved the debt ceiling crisis. The outlook over the economy surged 28% over the short run and 14% over the long run. Sentiment is now 28% above the historic low from a year ago and may be resuming its upward trajectory since then. As it stands, though, sentiment remains low by historical standards as income expectations softened. A majority of consumers still expect difficult times in the economy over the next year.
Year-ahead inflation expectations receded for the second consecutive month, falling to 3.3% in June from 4.2% in May. The current reading is the lowest since March 2021. In contrast, long-run inflation expectations were little changed from May at 3.0%, again staying within the narrow 2.9-3.1% range for 22 of the last 23 months. Long-run inflation expectations remained elevated relative to the 2.2-2.6% range seen in the two years pre-pandemic.
The headline was higher than expectations, and the market is likely going to react to the inflation expectations numbers. The fall will offer comfort to the Fed as it looks to combat rising prices. That emphasizes the credibility of the Fed (along with falling gas prices) and gives them some breathing room.
Home prices and real estate stability are massive factors for the American consumer. The report reflects some of the improved reports we have seen in new and pending home sales, mortgage applications. The accompanying chart shows we are near 40-year lows for sentiment to buy a house. Improved in affordability would help an improvement here.
About University of Michigan Consumer Sentiment Index
The University of Michigan Consumer Sentiment Index is a widely followed indicator of consumer confidence in the US economy. It is based on a survey of 500 households and measures their attitudes and expectations about the economy, personal finances, and buying conditions. The Index is released on the 10th of each month and provides insight into consumer spending, which is a significant component of the US economy.
A high reading of the Consumer Sentiment Index suggests that consumers are optimistic about the economy and their personal financial situation, and are more likely to spend money. Conversely, a low reading of the Index indicates that consumers are pessimistic and may be less likely to spend.
Overall, the University of Michigan Consumer Sentiment Index provides valuable insight into consumer behavior and sentiment, and is closely watched by economists, investors, and policymakers as an indicator of the health of the economy.
Source: University of Michigan
From The TradersCommunity News Desk