Consumers continue to approach economy with caution | The Arkansas Democrat-Gazette

In June, U.S. consumer sentiment declined for the third consecutive month, with Americans expressing concerns about their personal finances and the ongoing issue of inflation. The University of Michigan’s consumer sentiment index dropped to 65.6 this month from 69.1 in May. Although this reading is 30% higher than the low point seen in June 2022 when inflation hit a four-decade high, it still remains below levels typically associated with a healthy economy. Consumer outlook has been bleak since the start of the pandemic, especially with the spike in inflation in 2021.

Consumer spending plays a crucial role in driving economic growth and is closely monitored by the Federal Reserve and economists. The University of Michigan’s index had increased during the winter and spring months, reaching a peak of 79.4 in March. This boost had generated optimism that American consumers were feeling more positive about the economy as inflation seemed to be easing. However, these gains have now been reversed as inflation has continued to stay high in the first part of this year.

Despite the decline in consumer sentiment, data released this week shows that inflation decreased significantly in May. The costs of gasoline, new cars, and car insurance have all seen decreases. Consumer spending is a key factor in economic activity in the United States, and it was strong in the first quarter of the year, offsetting the overall slowdown in the economy during that time. Although spending did slow in April after accounting for inflation, Americans are still spending money on travel, dining out, concerts, and sports events.