Consumer sentiment improved for the first time in four months as gas prices eased but remains historically low amid ongoing inflation concerns. The final June reading for the University of Michigan Consumer Sentiment Index came in at 49.5 marking a 10.5% (4.7 points) increase from April and beating the expected reading of 48.9.
Key Takeaways
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The University of Michigan Consumer Sentiment Index rose to 49.5 in June, a 10.5% increase from April.
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Long-term business expectations surged 16% as consumer anxieties regarding the long-term consequences of the Iran conflict eased.
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Year-ahead inflation expectations declined to 4.6% in June from 4.8% recorded in May.
Joanne Hsu, the director of surveys, made the following comments:
Consumer sentiment confirmed its early-month reading, rising about 10% above May as gas prices moderated. Increases were seen across income, wealth, and political affiliation. Expected business conditions over the next five years surged 16% as consumers’ worries over long-term consequences of the Iran conflict appear to be easing. Still, sentiment remains in unfavorable territory at 13% below the February 2026 reading prior to the start of the Iran conflict, and nearly 20% less than a year ago. The cost of living remains at the forefront of consumers’ minds; for the third straight month, over half of consumers spontaneously mentioned that high prices are weighing down their personal finances.
Background on the University of Michigan Consumer Sentiment Index
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.
The chart below provides a long-term perspective on this widely watched indicator. We have highlighted the index's value at the start of each recession. The current level of 49.5 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 40.9% below its average reading of 83.8 (arithmetic mean) and 40.0% below its geometric mean of 82.5, based on data dating back to 1978.
To visualize the volatility and its impact on the broader economy, the following chart includes a three-month moving average and real GDP. Historically, prolonged periods where the moving average remains at these depressed levels have closely correlated with negative GDP growth (the red bars below).
The Political and Presidential Lens of Consumer Sentiment
Each month, the survey results highlight sentiment within each political party. Sentiment is often viewed through a partisan lens, but the data shows that sentiment has fluctuated both positively and negatively under both Republican and Democratic administrations. As the chart below illustrates, the current "plunge" is a rare moment of bipartisan agreement, with declines seen across the political spectrum as energy costs hit every household.
University of 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.
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Current Economic Conditions (CECI): Rose for the first time in four months to 47.7. This represents a 4.1% increase from the previous month but a 26.4% drop from a year ago. The latest reading was lower than the forecast of 48.4.
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Consumer Expectations (CEI): Rose for the first time in five months to 50.7 This represents a 15.0% increase from the previous month but a 12.7% drop from one year ago. The latest reading was higher than the forecast of 44.3.
University of Michigan Consumer Sentiment Index: Inflation Expectations
Year-ahead inflation expectations inched down from 4.8% in May to a still-elevated 4.6% this month. The current reading substantially exceeds the 3.4% reading seen in February before the Iran conflict began, along with all 2024 readings. Long-run inflation expectations fell back from 3.9% last month to 3.3% in June, remaining a bit higher than the 2.8% to 3.2% range seen in 2024.
The next update to this report will be published on July 17th.
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).
ETFs associated with sentiment include: Consumer Discretionary Select Sector SPDR Fund (XLY).
Read more updates by Jen Nash
