Consumer sentiment significantly improved in early June as the debt ceiling turmoil was resolved under the leadership of House Speaker Kevin McCarthy.
The University of Michigan’s consumer sentiment index jumped to 63.9, an eight percent rise from the May reading. Both the assessment of current conditions and expectations for the future improved.
“The outlook over the economy surged 28 percent over the short run and 14 percent over the long run. Sentiment is now 28 percent above the historic low from a year ago and may be resuming its upward trajectory since then,” Joanne Hsu, the director of the survey, said in a statement.
Despite the rise, sentiment remains low by historical standards. A majority of consumers still expect difficult times in the economy over the next year, according to Hsu.
Income expectations were diminished from the prior month’s reading but so were inflation expectations. Expectations for inflation a year from now fell to 3.3 percent from 4.2 percent, the lowest since March of 2021.
Long-term inflation expectations were little changed from May at 3.0 percent. For the last 23 months, inflation expectations over the longer run have been within a range of 2.9 percent to 3.1 percent, significantly above the 2.2 percent to 2.6 percent in the two years before the pandemic.