Consumer sentiment rose 13 percent in June amid a sharp drop in inflation, according to July’s University of Michigan Surveys of Consumers.
The index of consumer sentiment rose to 72.6, its highest reading in nearly two years and a 41 percent increase from its mark of 51.5 from a year ago. The index for current economic conditions increased 12.3 percent to 77.5 from 69 in June, and the index of consumer expectations increased by nearly 13 percent to 69.4. The long-term business conditions index increased 19 percent, and short-run business conditions increased 16 percent.
Year-ahead inflation expectations were little changed at 3.4 percent, 2 percent lower than its record high reading of 5.4 percent from April 2022. Long-run inflation expectations were mainly unchanged from June at 3.1 percent. Those results came as CPI inflation increased by only 3 percent in June, a sharp drop from its 4 percent rise in May.
“Sentiment climbed for all demographic groups except for lower-income consumers,” said Surveys of Consumers Director Joanne Hsu. “The sharp rise in sentiment was largely attributable to the continued slowdown in inflation along with stability in labor markets.”
The rise in consumer sentiment was also outlined in business research nonprofit’s June Conference Board Consumer Confidence Index, which increased seven points to its highest mark since the start of 2022.“Assessments of the present situation rose in June on sunnier views of both business and employment conditions,” said Chief Economist Dana Peterson. “Indeed, the spread between consumers saying jobs are ‘plentiful’ versus ‘not so plentiful’ widened, indicating upbeat feelings about a labor market that continues to outperform. Likewise, expectations for the next six months improved materially, reflecting greater confidence about future business conditions and job availability.”