Consumer Sentiment Rebounds but Remains Below Pre-Tariff Levels

There has been a moderate rebound in consumer sentiment, but overall, consumers’ attitudes are below pre-tariff levels.

Preliminary June data from the University of Michigan released Friday (June 13) found that consumer sentiment improved from recent nadirs. The initial estimates showed that sentiment improved 16% in June relative to May, although it was 18% below its December peak. The headline reading came in at 60.5, up from 52.2 in May.

“These trends were unanimous across the distributions of age, income, wealth, political party, and geographic region,” Surveys of Consumers Director Joanne Hsu said in a Friday statement.

The improvement was most noticeable in the Expectations sub-index, which rose 22% versus the May figure, but, again, the most recent reading was 20% below the December level.

The Current Expectations sub-index, which measures consumers’ assessment of present conditions, rose by 8%, remaining 15% below the December mark.

There was a “particularly steep increase for short- and long-run expected business conditions, consistent with a perceived easing of pressures from tariffs,” Hsu said in the statement.

Inflation is a key determinant of how consumers feel about their current and future prospects.

June data saw a decrease in year-ahead inflation expectations, from 6.6% last month to 5.1% this month. Five-year inflation expectations also fell and stood at 4.1% in June. Both readings were the lowest in three months but exceeded the levels seen in the previous 12 months.

The volatility in prices has had a ripple effect on the paycheck-to-paycheck economy, which ensnares two-thirds of consumers. PYMNTS Intelligence’s “New Reality Check: The Paycheck-to-Paycheck Report” found that 40% of consumers identified as “planners,” able to hew to their financial goals. That’s a roughly 20% plunge since February 2024, when roughly 1 in 2 were planners. The decline suggests more consumers in the United States are facing mounting financial strain.

Data released Wednesday (June 11) from the Bureau of Labor Statistics showed that the impact of tariffs was benign in May. The Consumer Price Index (CPI) increased 0.1% month over month, below April’s 0.2% increase. On an annualized basis, the yearly CPI rose 2.4% in May.

Yet, consumer assessments on various topics including business conditions, personal finances, buying conditions for big-ticket items, etc., all remain below pre-tariff-shock levels.

Consumers Are Still Wary

“Consumers appear to have settled somewhat from the shock of the extremely high tariffs announced in April and the policy volatility seen in the weeks that followed,” Hsu said in the statement. “However, consumers still perceive wide-ranging downside risks to the economy.”

“Despite this month’s notable improvement, consumers remain guarded and concerned about the trajectory of the economy,” she added, per the statement.

Separately, consumers expect food prices to see an accelerated pace of inflation over the next year, according to the Federal Reserve Bank of New York’s latest reading on inflation expectations. The year-ahead expected change in food prices increased by 0.4 percentage points to 5.5%, the highest level since October 2023.

Median nominal household spending growth expectations declined by 0.2 percentage points to about 5%, which would still be below the near-term inflation expectations asserted in the University of Michigan survey.