University Of Michigan Consumer Sentiment Jumps In June, Inflation Expectations Plummet

The University of Michigan consumer sentiment reading rebounded in June following a decline in May, as concerns about the debt ceiling crisis faded and the mood was boosted by a strong labor market and elevated stock market gains thanks to AI.

The consumer sentiment gauge for June increased from 59.2 in May to 63.9, in the first estimate, representing an 8% monthly increase and surpassing forecasts of 60. 

At the same time, inflation expectations for the next year tumbled to 3.2%, the lowest since March 2021.

Highlights From June UMich Report:

• The overall index rose from 59.2 to 63.9, up 8% monthly and jumping back to four-month highs. In yearly terms, the consumer sentiment index is 27.9% higher.
• Current economic conditions index surged from 64.9 in May to 68, up 4.8%. 
• The index of consumer expectations rose from 55.4 in May to 61.3, up 10.6%. 
• The year-ahead inflation expectations eased from 4.2% to 3.2%, highlighting easing worries over sticky inflation.
• Long-run inflation expectations rose slightly eased from 3.1% in May to 3% in June.
• According to Surveys of Consumers Director Joanne Hsu, there is “greater optimism as inflation eased and policymakers resolved the debt ceiling crisis.” Despite the sentiment being 28% above the historic low from a year ago, it “remains low by historical standards as income expectations softened,” she said. “A majority of consumers still expect difficult times in the economy over the next year.”

Market Reactions: The SPDR S&P 500 ETF Trust SPY, which tracks the S&P 500 index, was marginally lower, down 0.1%, on Friday, after posting six straight sessions of gains.

Traders slightly eased expectations on a July Fed rate hike, by assigning a 71% chance, down from 77% prior to the release, according to CME Group FedWatch tool.