Consumer sentiment rebounded in June, improving for the first time in six months. The Michigan Consumer Sentiment Index rose to 60.5 this month, its highest level since February but still historically low. Consumer sentiment has fallen by 11.3% (7.7 points) compared to a year ago.
The Michigan Consumer Sentiment Index is a monthly survey of consumer confidence levels in the U.S. with regards to the economy, personal finances, business conditions, and buying conditions, conducted by the University of Michigan. There are two reports released each month; a preliminary report released mid-month and a final report released at the end of the month.
Joanne Hsu, the director of surveys, made the following comments:
Consumer sentiment improved for the first time in six months, climbing 16% from last month but remaining about 20% below December 2024, when sentiment had exhibited a post-election bump. These trends were unanimous across the distributions of age, income, wealth, political party, and geographic region. Moreover, all five index components rose, with a particularly steep increase for short and long-run expected business conditions, consistent with a perceived easing of pressures from tariffs. Consumers appear to have settled somewhat from the shock of the extremely high tariffs announced in April and the policy volatility seen in the weeks that followed. However, consumers still perceive wide-ranging downside risks to the economy. Their views of business conditions, personal finances, buying conditions for big ticket items, labor markets, and stock markets all remain well below six months ago in December 2024. Despite this month’s notable improvement, consumers remain guarded and concerned about the trajectory of the economy.
See the chart below for a long-term perspective on this widely watched indicator. We've highlighted the index's value at the start of each recession and included a callout to the most recent 12 months. At 60.5, the current level is below the index's value at the start of all six recessions since its inception.
To put today’s report in historical context, consumer sentiment is currently 28.4% below its average reading of 84.4 (arithmetic mean) and 27.4% below its geometric mean of 83.3, based on data dating back to 1978. The current index level is at the 5th percentile of the 570 monthly data points in this series.
This indicator is somewhat volatile, with an average monthly change of 3.1 points. The latest data shows a 8.3-point change from the previous month. To visualize the volatility, here’s a chart with monthly data and a three-month moving average. The bottom half of the chart includes real GDP, which allows us to evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.
Each month, the survey results highlight sentiment within each political party. To provide additional context, I’ve included a chart that shows the presidencies over our timeframe. As you can see, sentiment has fluctuated both positively and negatively under both Republican and Democratic administrations.
Michigan Consumer Sentiment Index: Components
The Michigan Consumer Sentiment Index consists of two sub-indexes: the Current Economic Conditions Index (CECI) and the Consumer Expectations Index (CEI). The CECI reflects consumers' views of their current financial situation and the overall economy, while the CEI gauges their outlook for the future.
In June, the CECI rose to 63.7, its first monthly increase in six months. This represents an 8.1% increase from the previous month and a 3.3% decline from a year ago. This reading was above the forecast of 59.4.
Meanwhile, the CEI rose to 58.4. This represents a 21.9% increase from the prior month, the largest monthly increase in nearly three years, and a 16.1% decline from one year ago. This reading was above the forecast of 49.0.
Michigan Consumer Sentiment Index: Inflation Expectations
Year-ahead inflation expectations plunged from 6.6% last month to 5.1% this month. Long-run inflation expectations fell for the second straight month, stepping down from 4.2% in May to 4.1% in June. Both readings are the lowest in three months. Consumers’ fears about the potential impact of tariffs on future inflation have softened somewhat in June. Still, inflation expectations remain above readings seen throughout the second half of 2024, reflecting widespread beliefs that trade policy may still contribute to an increase in inflation in the year ahead.
Other Sentiment Indicators
For an additional perspective on consumer attitudes, see the most recent Conference Board's Consumer Confidence Index. Both indexes gauge consumer attitudes toward the current and future strength of the economy. However, the Consumer Confidence Index is more influenced by employment and labor market conditions while the Michigan Sentiment Index is more focused on household finances and the impact of inflation.
The Conference Board index is the more volatile of the two, but the broad pattern and general trends have been remarkably similar to the Michigan index.
And finally, the prevailing mood of the Michigan survey is also similar to the mood of small business owners, as captured by the NFIB business optimism Index (monthly update here).
The next update to this report will be published on June 27th.
ETFs associated with sentiment include: Consumer Discretionary Select Sector SPDR Fund (XLY).
Read more updates by Jen Nash
