The latest University of Michigan Consumer Sentiment Index showed that Americans are upbeat about the economy this month compared with May. The index, which evaluates the relative level of current and future economic conditions through a survey of approximately 500 consumers, recorded a reading of 49.5, compared with May’s 44.8. While the 10.5% month-over-month increase is good news, year-over-year is down 18.5%
Consumer confidence had dipped lately, shaped by the ongoing conflict between the U.S. and Iran, which has boosted inflation in large part due to rising energy prices. The uncertain timeline for an end to the conflict has in turn led to an uncertain economic outlook, including by those at the Federal Reserve. But signs now point to a more positive view.
“Consumer sentiment confirmed its early-month reading, rising about 10% above May as gas prices moderated,” noted Surveys of Consumers Director Joanne Hsu. “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.Â
“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,” she said.Â
“Year-ahead inflation expectations inched down from 4.8% in May to a still-elevated 4.6% this month,” added Hsu. “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.”
