By Christopher Lugerber, Economics writer for the Associated Press
WASHINGTON (AP) – Consumer sentiment rose for the first time in six months in June. The latest indication that Americans’ views on the economy have improved as inflation has been tamed and the Trump administration reached a ceasefire in trade war with China.
Preliminary readings of the University of Michigan’s closely monitored consumer sentiment index, released Friday, rose 16% from 52.2 to 60.5. The significant increase followed a steady decline that remained at the second-lowest level in the survey’s nearly 75 years history. Consumer sentiment is still down 20% compared to December 2024.
“Consumers appear to have resolved some of the shock of the extremely high tariffs announced in April and the policy volatility seen in the weeks that followed,” Joan Huss, director of research, said in writing. “However, consumers still recognize the broader risks of drawbacks to the economy.”
Americans have taken a more bleak view of the future of the economy after President Donald Trump unleashed a wide trade war and imposed sudden tariffs on China, the European Union and dozens of other countries. However, in April, Trump postponed a series of tariffs for around 60 countries, reaching a temporary ceasefire with China last month after both sides sharply ratcheted tariffs on each other.
The conference committee’s consumer confidence index, released in late May, also rose after five consecutive drops related to tariff anxiety.
US duties remained rising compared to historical levels, but so far, it has not exacerbated overall inflation. Prices rose just 2.4% compared to a year ago in May, slightly up from 2.3% in April. Still, most economists hope that tariffs will be hit harder in the coming months.
Consumer trust is sharply divided by political outlook, with Republicans feeling much better about the economy under Trump than Democrats. Republicans are low, but democratic sentiment about the economy was far higher under Biden. However, sentiment has improved this month between both parties and independent advocates.
Consumer inflation expectations – essentially a measure of worrying about future inflation – has declined this month. This is welcomed by the Federal Reserve inflationary fighters. Inflation expectations can be self-fulfilling. Because when people worry about rising prices, they can take measures such as asking for higher wages, such as increasing prices even further.
The Fed is expected to hold next week and change its main short-term interest rate to around 4.3%.
Original issue: June 13th, 2025 10:22am EDT
