US Consumer Sentiment Jumps 16% in June Amid Trade Truce

Consumer sentiment in the United States saw a notable improvement in June, marking the first increase in six months. This uptick is indicative of a more positive outlook among Americans regarding the economy, as inflation remains stable and the Trump administration has achieved a temporary ceasefire in its trade dispute with China.

The preliminary results of the University of Michigan’s consumer sentiment index, released on Friday, showed a significant jump from 52.2 to 60.5, representing a 16% increase. This surge follows a period of steady declines that had brought the index to its second-lowest level in nearly 75 years. Despite this improvement, consumer sentiment remains 20% lower than it was in December 2024.

Joanne Hsu, director of the survey, attributed the rise in consumer sentiment to a gradual recovery from the initial shock caused by the extremely high tariffs announced in April and the subsequent policy volatility. However, Hsu noted that consumers still perceive significant downside risks to the economy.

The trade war initiated by President Donald Trump, which involved imposing steep tariffs on numerous countries, had previously led to a more pessimistic view of the economy’s future. However, recent developments, such as the postponement of tariffs on about 60 nations in April and the temporary truce with China, have contributed to a more optimistic outlook.

The Conference Board’s consumer confidence index, released in late May, also showed an increase after five consecutive declines, which were largely attributed to concerns over tariffs. Despite the elevated duties compared to historical levels, overall inflation has not worsened significantly. Prices rose by 2.4% in May compared to the previous year, a slight increase from 2.3% in April. Economists generally expect tariffs to have a more pronounced impact in the coming months.

Consumer confidence varies significantly based on political affiliation. Republicans have expressed greater optimism about the economy under Trump compared to Democrats. However, this month, sentiment improved among supporters of both parties as well as independents.

Inflation expectations among consumers have decreased, which is a positive sign for the Federal Reserve, as high inflation expectations can lead to self-fulfilling prophecies where people take actions that further drive up prices. The Fed is scheduled to meet next week and is expected to maintain its key short-term interest rate at approximately 4.3%.