U.S. consumer sentiment showed an increase in early June, marking the first rise in four months. The University of Michigan’s preliminary sentiment index climbed to 48.9 in June from a record low of 44.8 in May. This upturn, while higher than most economists anticipated, still represents the second-lowest reading since the 1970s. The improvement is largely attributed to a decrease in gasoline prices, which provided some relief to Americans facing high inflation, though overall economic perceptions remain bleak.
The improvement was broad, affecting various age groups, education levels, and political affiliations, with lower-income households experiencing a particularly strong sentiment increase. This is consistent with gasoline costs representing a larger portion of their budgets. Joanne Hsu, director of the surveys, noted that consumers, though experiencing some relief, remain burdened by recent inflation, especially with concerns that price pressures could persist in the short term.
Despite the rise, consumer sentiment remains considerably lower than previous periods, being 13% below January 2026 levels and nearly 20% lower than a year ago. May's annual consumer price increase was reported at 4.2%, a three-year high. Inflation expectations also eased slightly, with the forecast for the next year dropping to 4.6% from 4.8% in May, and the five-year outlook falling to 3.4% from 3.9%. However, these figures still exceed the 2.8% to 3.2% range seen in 2024.
Economists closely monitor this index as consumer sentiment influences spending, a primary driver of U.S. economic activity. A reading near 49 is historically weak, more akin to levels observed during economic downturns than periods of sustained growth. The ongoing Middle East conflict, especially its impact on oil shipments through the Strait of Hormuz, continues to pose a risk to the economic outlook and consumer confidence.
