U.S. consumer sentiment bounced off record lows in early June as easing gasoline prices offered households some relief, though concerns about inflation stoked by the Middle East conflict lingered.
The consumer sentiment staged a modest recovery in early Jun-26, with the University of Michigan’s Consumer Sentiment Index rising to 48.9 from May’s historic low of 44.8, beating market expectations of 46.0. The improvement was primarily driven by relief following an early-month easing in retail gasoline prices, fostering broad-based gains in optimism across all major demographic, educational, and political segments.
Lower-income consumers, for whom gasoline represents a larger share of budgets, showed a particularly strong increase in sentiment. Assessments of personal finances and business conditions both improved this month. This temporary reprieve on the energy front also fed into brighter short-term assessments, as consumers reported measurable upgrades in both their personal financial situations and near-term business conditions.
Despite the monthly uptick, overall sentiment remains severely subdued, down -13% since Jan-26 and -19%yoy from a year ago, as consumers continue to focus on everyday financial pressures. Inflation concerns remain a key issue. Year-ahead inflation expectations edged down to +4.6% (May-26: +4.8%), while long-run inflation expectations fell to 3.4% (May-26: +3.9%). Households remain highly concerned over the potential for stubbornly sticky short-term price pressures.
Looking ahead at this week’s FOMC meeting, MBSB believed the Fed would hold rates steady and shift away from its easing bias. Fed officials were likely to shrug off the slight drop in inflation expectations, noting that respondents in the University of Michigan survey anticipated higher borrowing costs over the next year.
