US consumer sentiment improved in early June, rebounding from a record low as falling petrol prices and a resilient labour market provided households with some relief despite lingering concerns over inflation and the Middle East conflict.
According to Reuters, the University of Michigan’s Consumer Sentiment Index rose to 48.9 in June from an all-time low of 44.8 in May, beating economists’ forecast of 46.0. The improvement was broad-based across income groups, ages, education levels and political affiliations, with lower-income households leading the recovery.
The rebound coincided with a decline in the national average petrol price to US$4.11 per gallon from a four-year high of US$4.56 in late May. Lower fuel costs helped ease pressure on household budgets, particularly among lower-income consumers.
Inflation concerns, however, remain elevated. Consumer prices rose above 4% in May for the first time in three years, while the ongoing US-Iran conflict continues to cloud the economic outlook despite a fragile ceasefire.
Consumers’ one-year inflation expectations eased slightly to 4.6% from 4.8%, while five-year inflation expectations fell to 3.4% from 3.9%. Even so, expectations remain high enough to reinforce views that the Federal Reserve will keep interest rates unchanged at next week’s policy meeting and maintain a cautious stance on future rate cuts.
The latest survey suggests consumers are finding some relief from lower energy costs, but persistent inflation and geopolitical risks continue to weigh on confidence.
