Written by Steven Hansen
The final University of Michigan Consumer Sentiment for June came in at 85.5, down from the preliminary of 86.4, up from May’s 82.9, down from April’s 88.3, and up from March’s 84.9.
The Econoday consensus range was 85.0 to 89.0 (consensus 86.5)
Surveys of Consumers chief economist, Richard Curtin, makes the following comments:
Although consumer sentiment slipped in late June, it still remained 3.1% above the May reading, and the second highest since the start of the pandemic. All of the June gain was among households with incomes above $100,000, and mainly in the way they judged future economic prospects. Consumers continued to pay close attention to three critical factors: inflation, unemployment, and interest rates. Not only did year-ahead inflation expectations fall slightly to 4.2% in June from May’s decade peak of 4.6%, consumers also believed that the price surges will mostly be temporary. Declines in unemployment rate in the year ahead were expected by 56% of consumers, the largest proportion ever recorded in the history of the surveys. The growing strength in the economy meant that nearly three-quarters of all consumers expected rising interest rates during the year ahead, the highest proportion since 2018 when the economy was near its last peak. When the pandemic first started, consumers were quite uncertain about their job and income prospects, but reported widespread declines in market prices for homes, vehicles, and household durables (see the featured chart). Those favorable price references have dropped to the most negative in a decade, and job and income prospects have improved, but not quite as favorable as in the last few years of the prior expansion. While many are optimistic about a gradual end to the pandemic, consumers still judged the risks from emerging covid variants as appreciable. It is likely that consumers will not reduce their savings and wealth to pre-pandemic levels, but maintain a higher level of precautionary funds.
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