In early June, consumer sentiment improved as optimism grew regarding the global trade war, according to a University of Michigan survey. The survey indicated a significant rebound in the Consumer Sentiment Index, which rose to 60.5, surpassing Dow Jones estimates of 54, marking a 15.9% increase from the previous month. Notably, the current conditions index increased by 8.1%, while future expectations surged by 21.9%. The positive changes coincided with a reduction in the aggressive rhetoric surrounding President Trump’s tariffs, particularly his April 2 announcement, which initiated a 90-day negotiation period showing signs of progress with China.
Despite this optimism, consumers continue to express concerns about the economy and potential inflation, with sentiment indexes remaining lower than the previous year’s levels. The one-year inflation outlook dropped to 5.1%, reflecting a 1.5 percentage point decrease, while the five-year estimate fell slightly to 4.1%. Joanne Hsu, the survey director, noted that while concerns about tariffs influencing future inflation are easing, inflation expectations are still higher than those seen in the latter half of 2024.
Additionally, other economic indicators, including a report from the Federal Reserve of New York, revealed a one-year inflation view of 3.2%. Concurrently, recent data from the Bureau of Labor Statistics indicated minimal monthly increases in both producer and consumer prices, suggesting limited pressure from tariffs. This scenario has prompted Trump and White House officials to advocate for interest rate cuts by the Federal Reserve, which is expected to convene next week, with indications pointing towards no changes until September. The Michigan survey will be updated later this month to reflect any further shifts in consumer sentiment.
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