Consumers remain cautious about the state of the economy

Consumer sentiment in the United States fell for the third consecutive month in June due to concerns about personal finances and persistent inflation. The University of Michigan’s consumer sentiment index dropped to 65.6, lower than May’s reading of 69.1. While this month’s figure is an improvement from the low point reached in June 2022 during peak inflation, it remains below levels indicative of a strong economy. Since the pandemic, consumers have generally had a negative outlook, especially after inflation rose sharply in 2021.

Consumer spending is a key driver of economic growth, making the University of Michigan’s index an important measure of consumer confidence. The index had risen last winter and spring, reaching a peak of 79.4 in March, suggesting growing optimism as inflation decreased. However, the recent drop in sentiment reflects ongoing concerns about inflation, which remained high in the first quarter of this year.

Recently released data shows a significant decrease in inflation in May, with lower costs for gasoline, new cars, and car insurance. As consumer spending plays a pivotal role in the US economy, the Federal Reserve and economists closely monitor these trends. Despite a slowdown in spending in April after adjusting for inflation, Americans continue to invest in travel, dining out, and entertainment events, supporting economic activity in the country.