Consumer Sentiment Surges as Inflation Fears Collapse and Tariff Strategy Becomes Clear

Consumer sentiment soared in early June, rising for the first time in six months and posting its strongest monthly gain since January 2024, according to preliminary data released Friday by the University of Michigan.

The university’s closely watched index of consumer sentiment jumped to 60.5 in the first half of June, up from 52.2 the prior month—a 16 percent gain that beat every estimate in a Wall Street Journal survey of economists. The expectations sub-index surged more than 21 percent, the biggest one-month gain since late 2023.

The sharp rebound in optimism follows weeks of steady economic data, including soft inflation reports and a series of trade announcements from the Trump administration aimed at restoring long-term stability to U.S. supply chains without reigniting price pressures.

Widespread Gains Across Political and Economic Groups

The increase in sentiment was broad-based, with improvements “unanimous across the distributions of age, income, wealth, political party, and geographic region,” according to the survey’s director, Joanne Hsu. That includes gains among Democrats, Republicans, and independents alike, and a particularly strong jump in expectations for business conditions and personal finances.

The sentiment index had drifted lower in recent months amid media warnings that the Trump administration’s reciprocal tariff measures might reignite inflation. But those fears now appear to be receding.

Inflation Expectations Plunge

Consumers now expect prices to rise 5.1 percent over the next year, down from 6.6 percent in May—the largest one-month decline in short-term inflation expectations since 2001. Long-run expectations also edged lower to 4.1 percent, marking the second straight monthly drop.

The dramatic repricing of inflation risks aligns with recent government reports showing that both consumer and producer prices rose just 0.1 percent in May, defying claims that tariffs would fuel a new wave of cost-push inflation. Instead, prices for goods have remained stable or fallen, and many retailers are now reporting renewed consumer spending strength.

“Consumers’ fears about the potential impact of tariffs on future inflation have softened somewhat in June,” Hsu said in a statement.

Tariff Strategy Appears to Be Working

The sentiment reversal comes amid signs that the administration’s trade negotiations are lowering uncertainty. Late last month, the U.S. and China agreed to maintain current tariff levels as part of a temporary framework, and President Trump has delayed a planned tariff hike on European goods while bilateral talks proceed.

While the media and some economists warned that April’s trade measures would rattle markets and undermine confidence, the data suggest consumers have grown more confident in the direction of policy. Despite headlines highlighting “policy volatility,” the actual implementation has been measured, phased, and—so far—non-inflationary.

Consumers “appear to have settled somewhat from the shock of the extremely high tariffs announced in April,” Hsu said. But she also noted that overall sentiment remains about 20 percent below December’s post-election high, when optimism surged after Trump’s re-election.

Cautious but Encouraging Outlook

Although consumers continue to express concerns about the broader economic trajectory, the June data mark a clear shift in mood. All five components of the sentiment index rose, and expectations for future economic conditions are at their highest level since last year.

Financial markets largely shrugged off the report, focusing instead on geopolitical developments in the Middle East. But for businesses and policymakers, the consumer mood may carry more lasting significance.

The rebound in sentiment, combined with falling inflation expectations and renewed wage gains, suggests that American households are adjusting to a new economic landscape—one shaped less by the monetary easing of the past decade and more by targeted policies aimed at restoring industrial strength and price stability.

The final June sentiment report will be released on June 27.

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