Consumer sentiment rebounds in first reading for June: CEI analysis

University of Michigan’s consumer sentiment report showed a rebound in its first reading for June, likely due to slower-growing inflation and a calmer-than-expected month for tariffs in May, CEI senior economist Ryan Young explains.

“Consumer sentiment rebounded in June’s first preliminary reading. There was almost nowhere for sentiments to go but up. April and May’s readings were tied for the second-lowest readings ever in the University of Michigan’s survey, going back to 1957.

“Despite the improvement, consumer sentiment has still lost a quarter of its value compared to when President Trump re-took office in January. It is down 11.9 percent from a year ago.

“The main reason for the improvement was that the public now expects inflation to increase only 5.1 percent, versus 6.5 percent in last month’s reading.

“Actual inflation has been far less, at 2.4 percent over the last year. Still, those expectations can in part be a self-fulfilling prophecy, since people take inflation into account when making larger purchases. Businesses also make supply chain decisions, investments, and long-term contracts based on their inflation expectations.

“Also helping is a relative lack of tariff volatility in May. With Trump’s paused Liberation Day tariffs set to resume on July 9, and with few major trade deals announced, plus a pending court decision on emergency powers-based tariffs, tariff uncertainty will remain a concern for at least the next several months.”