Consumer sentiment rebounded in June, increasing for the first time in six months. The Michigan Consumer Sentiment Index rose 16.3% (8.5 points) to 60.7 this month, marking the largest monthly increase in over 30 years. This is the index's highest level since February but still reflects historically low levels of optimism. Consumer sentiment has fallen by 11.0% (7.5 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 surged 16% from May in its first increase in six months—confirming the mid-month reading—but remains well below the post-election bounce seen in December 2024. The improvement was broadbased across numerous facets of the economy, with expectations for personal finances and business conditions climbing about 20% or more. Despite June’s gains, however, sentiment remains about 18% below December 2024, right after the election; consumer views are still broadly consistent with an economic slowdown and an increase in inflation to come. Consumers continue to be concerned about the potential impact of tariffs, but at this time they do not appear to be connecting developments in the Middle East with 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 60.7, 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 28.1% below its average reading of 84.4 (arithmetic mean) and 27.1% 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 8.5-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 64.8, its first monthly increase in six months. This represents an 10.0% increase from the previous month and a 1.7% decline from a year ago. This reading was above the forecast of 63.7.
Meanwhile, the CEI rose to 58.1. This represents a 21.3% increase from the prior month, the largest monthly increase in nearly three years, and a 16.5% decline from one year ago. This reading was belowthe forecast of 58.4.
Michigan Consumer Sentiment Index: Inflation Expectations
Year-ahead inflation expectations plummeted from 6.6% last month to 5.0% this month. Long-run inflation expectations receded for the second straight month, falling back from 4.2% in May to 4.0% in June. Both readings are the lowest in three to four months. Consumers’ fears about the potential impact of tariffs on future inflation softened somewhat in June. Still, inflation expectations remain above readings seen throughout the second half of 2024, reflecting widespread beliefs that risks to inflation have not fully abated.
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 July 18th.
ETFs associated with sentiment include: Consumer Discretionary Select Sector SPDR Fund (XLY).
Read more updates by Jen Nash
