WASHINGTON (AP) – Consumer sentiment saw an increase in June for the first time in six months. This marks a positive shift in Americans’ perceptions of the economy as inflation has been controlled, and the Trump administration has successfully negotiated a temporary truce in trade tensions with China.
The preliminary results from the University of Michigan’s widely observed consumer sentiment index; released on Friday increased by 16%, rising from 52.2 to 60.5. This significant uptick came after a persistent decline that left sentiment at the second-lowest point in the nearly 75-year history of the survey. Current consumer sentiment is still down 20% from December 2024.
“Consumers seem to have absorbed some of the shock from the exceedingly high tariffs imposed in April, along with the policy instability that followed,” stated Joan Huss, director of research, in writing. “Nonetheless, consumers remain aware of the wider risks and potential setbacks to the economy.”
Americans have taken a more pessimistic view of the economy’s future following President Donald Trump’s initiation of a broad trade war and the unexpected tariffs levied on China, the European Union, and numerous other countries. However, in April, Trump deferred a series of sweeping tariffs. A temporary ceasefire was reached last month between approximately 60 countries and China, after both parties had significantly raised tariffs against each other.
Released at the end of May, the Conference Committee’s Consumer Trust Index has shown improvement after five consecutive declines driven by tariff-related concerns.
While US tariffs remain elevated compared to historical averages, they have not significantly exacerbated inflation thus far. In May, prices increased by only 2.4% compared to a year earlier, a slight rise from 2.3% in April. Economists, however, are concerned that tariffs might have a more substantial negative impact in the upcoming months.
Consumer confidence is sharply divided along political lines, with Republicans feeling considerably more optimistic about the economy under Trump than Democrats. While Republican sentiment is low, Democratic optimism about the economy was significantly higher during Biden’s tenure. Nonetheless, sentiment has improved among both parties and among independent voters this month.
Expectations for consumer inflation—essentially a gauge of concerns about future price increases—have decreased this month. This is a positive development for the Federal Reserve’s efforts to combat inflation, as inflation expectations can be self-perpetuating. When individuals fear rising costs, they may take actions like demanding higher wages, which can drive prices even higher.
The Fed is anticipated to hold its next meeting next week, adjusting its primary short-term interest rate to approximately 4.3%.
Source: apnews.com