WASHINGTON — In a positive economic update, consumer sentiment has climbed in June for the first time in half a year. This indicates that Americans are becoming more optimistic about the economy as inflation remains manageable and the U.S. administration has reached a temporary halt in its trade disputes with China.
The University of Michigan’s preliminary consumer sentiment index, which is highly regarded, saw a notable boost, rising 16% from a previous reading of 52.2 to 60.5, according to figures released Friday. This increase follows a series of declines that had left last month’s preliminary figure at its second-lowest level in nearly 75 years. Nonetheless, current consumer sentiment remains 20% lower than it was in December 2024.
Joanne Hsu, who leads the survey, mentioned in a statement that there has been some stabilization following the “shock of the extremely high tariffs announced in April and the policy volatility that ensued.” Nonetheless, Hsu noted that there are still perceived risks that could negatively impact the economy.
The economic outlook darkened for many Americans when President Donald Trump initiated a comprehensive trade war, which involved significant tariffs on China, the European Union, and numerous other nations. However, in a turn of events, Trump delayed a series of large tariffs on about 60 countries in April and brokered a temporary peace with China last month, which followed an intense period of increasing tariffs between the two countries.
The Conference Board’s consumer confidence index also rose in late May after experiencing five consecutive drops that were attributed to tariff concerns.
While U.S. tariffs are still relatively high compared to historical norms, they have not yet exacerbated inflation significantly. In May, prices rose by 2.4% compared to the previous year, a slight increase from April’s 2.3%. Nevertheless, many economists predict that tariffs may start to have a more pronounced impact in the future.
Consumer confidence shows a distinct divide along political lines, with Republicans expressing greater optimism about the economy under Trump compared to Democrats, who felt more positive during Biden’s tenure. However, this month has seen improvement in sentiment across party lines, including independents.
Moreover, consumers’ expectations for inflation—a critical metric of their concern about future price increases—have dropped, a development likely to be welcomed by Federal Reserve policymakers focused on managing inflation. These expectations can become self-fulfilling, as anxiety about rising prices might lead to actions such as demanding higher wages, which can intensify inflation.
The Federal Reserve is expected to maintain its benchmark short-term interest rate at about 4.3% during its meeting next week.
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