Sentiment finally rises
After months of feeling downbeat, consumers’ attitudes are perking up.
The University of Michigan Consumer Sentiment index (one of the oldest gauges of how consumers view current economic conditions, personal financial situations, and expectations for the economy) jumped eight points in June, to 60.5.
That’s the index’s highest level since February and the first time the benchmark has risen in six months (see the chart).
The latest reading also saw a significant reduction in consumers’ predictions of what the inflation rate will be 12 months from now, from 6.6% in May to 5.1% in June. That’s the lowest level in three months, and it follows four consecutive months in which the Consumer Price Index has come in lower than expected.
A June Jump In Consumer Sentiment
Source: Bloomberg, calculations by Horizon Investments, data as of 6/9/25.
A major driver of these changes: President Trump has largely backed down from the aggressive trade war he started in April and is instead negotiating lower tariff rates with various countries.
It’s important to note that sentiment remains lower and inflation expectations remain higher than they were at the end of 2024. Also, this was a preliminary reading that may be revised later this month. Still, these recent improvements suggest to us that consumers, who account for two-thirds of U.S. economic activity, are becoming more optimistic about the road ahead.
