Consumer sentiment in the United States has declined for the third consecutive month in June. According to the University of Michigan’s consumer sentiment index, which was released in a preliminary version on Friday, the index dropped to 65.6 this month from 69.1 in May. This marks a decrease in Americans’ view of their own finances and concerns about ongoing inflation. Although June’s reading is significantly higher than the low point reached in June 2022, when inflation was at a four-decade high, it is still below levels typically associated with a healthy economy.
Consumers have been generally pessimistic about the economy since the pandemic, especially since inflation spiked in 2021. Consumer spending is a vital factor in driving growth, and the negative sentiment about the economy is also impacting President Joe Biden’s reelection prospects. While the University of Michigan’s index showed some improvement last winter and spring, reaching a peak of 79.4 in March, hopes of a more optimistic view were dashed as inflation remained persistently high in the first quarter of this year.
Despite consumer anxiety over inflation, data released this week indicated a substantial cooling in May, with decreases in the cost of gasoline, new cars, and car insurance. Consumer spending is closely monitored by the Federal Reserve and economists, as it plays a key role in driving economic activity in the U.S. While spending was robust in the first quarter of the year, supporting an otherwise slowing economy, it did slow down in April after adjusting for inflation. However, Americans continued to spend on travel, dining out, and entertainment, indicating some level of confidence in the economy despite ongoing inflation concerns.