The Index of Consumer Sentiment by the University of Michigan, a tool to measure consumer feelings towards economic conditions and their personal finances, has reported an increase for the first time in six months. In June, the index showed a 16% rise compared to May; however, the index was still 20% lower than December 2024's level. The June index score of 60.5, though increasing, is still underneath the typical range of 100 which was the norm before the pandemic.
The rise in consumer sentiment comes as optimistic news about trade talks may lead to relaxation of the high tariffs that President Trump has imposed recently. Economists monitor consumer sentiment towards the economy avidly as their feelings can greatly influence consumer spending and hence, the GDP.
Chief economist at the Navy Federal Credit Union, Heather Long, expressed her pleasure regarding the rise in sentiment, attributing it to American's relief with President Trump's potential easing of the trade war and tariffs. However, she noted a continued caution of consumers towards possible price hikes.
The decreased apprehension from consumers mirrors the optimisms of professional economists, who have reduced their predictions on the potential harm President Trump's tariffs could cause to the economy. Oxford Economics' economists, for instance, reduced their forecasted likelihood of a recession within the next year to 35% compared to the 15% chance of a recession in any given year.
Despite mild inflation rates and a strong job market, predictors are still preparing for an employment dip and inflation increase as more companies pass on the cost of import taxes to their consumers.