U.S. Consumer Rebounds From Record Low But Stands Below Expectations

U.S. consumer sentiment rose after hitting a record low in June but stood below expectations.

Concretely, the University of Michigan’s Surveys of Consumer said the index increased to 49.5 this month, up from 44.8 in May. However, economist surveyed by Reuters expected the figure to be 50.0.

Joanne ​Hsu, the director of the Surveys of Consumers, said the cost of living “remains at the ​forefront of consumers’ minds.”

“For the ‌third ⁠straight month, over half of consumers spontaneously mentioned that high prices are weighing down their personal finances,” she added.

The survey also polled respondents’ expectations for inflation over the next year. It dropped to 4.6% from 4.8% in May. Expectations for inflation over the next five years dropped to 3.3% from 3.9% last month.

Sentiment improved even though the Federal Reserve’s preferred price gauge rose to its highest level since 2023.

Concretely, the core personal consumption expenditures price index climbed 0.3% for the month, with the inter-annual figure clocking in at 3.4%, the highest number since October 2023. The figure was in line with the Dow Jones Consensus.

The index taking into account all items, including more volatile components like food and energy, stood at 4.1%, the highest since April 2023.

Energy again led price gains, with related goods and services increasing 4% for the month. Financial services and insurance climbed 1.2%.

However, despite the increases, consumer spending was stronger than expected. Personal consumption expenditures increased 0.7% for the month, 0.1 percentage points above expectations and ahead of the inflation rate.

Figures came days after the Federal Reserve kept interest rates unchanged in Kevin Warsh’s first meeting as chair.

The vote was unanimous, in contrast with previous meetings. “Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East,” the central bank said in its statement. It added that “job gains have kept pace with the workforce.”

Policymakers also released their expectations for the future. Concretely, they believe that, under current circumstances, they will implement one rate hike this year and cut it once in 2027.