Sentiment rises for first time in six months but consumers remain guarded
U.S. consumer sentiment rebounded in June, increasing for the first time this year even as consumers remain worried about the economy.
The University of Michigan’s Consumer Sentiment Index rose 16.3% to 60.7 in June, but was still about 18% below December 2024. Consumer sentiment has fallen by 11.0% compared to a year ago.
With regard to current economic conditions, the index rose 10% to 64.8. Looking ahead, the expectations index surged 21.3% to 58.1. It is down 16.5% year over year.
“Consumers feel they have some breathing room given that the historically high tariffs announced earlier this year have not been sustained, and the worst-case scenarios for the economy have not come to fruition,” said Joanne Hsu, chief economist, surveys of consumers, University of Michigan. “However, consumers still worry that higher inflation and an economic slowdown are on the horizon, and they remain very cautious. At this time, they are not connecting Middle East developments to the economy.”
Despite the improvements, consumers are hardly optimistic about the economy, noted Hsu, and views have not recovered from the steep declines seen this year.
Labor market
Labor market expectations improved this month but also remain considerably worse than at the beginning of the year. About 57% of consumers expect unemployment to rise in the year ahead, down from 66% in March but still much higher than the 40% seen in December 2024.
Expectations for consumers’ own income growth improved modestly this month, but June readings are worse than six months ago. Expectations for personal finances soared 17% from near historic lows in May but are 17% below December 2024.
“Thus, while consumers feel modestly more secure about their incomes this month than in May, they have not regained the kind of confidence over their personal finances that would support robust spending,” Hsu noted.
Tariffs
Beliefs about the anticipated effects of tariffs have shaped consumers’ views of the economy this year, and June’s results are no different. About 59% of consumers provided unsolicited comments about tariffs, down from 66% last month but marking three consecutive months in which a majority of consumers did so.
This month saw a modest reduction in the share of consumers who spontaneously cited tariffs as a negative factor for buying durable goods or cars, both of which improved in June but remain worse than last December. The share of consumers expecting business conditions to worsen in the year ahead fell from 64% in May but now stands at a still-high 55%, compared with just 29% in November 2024.
