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Consumers are a bit more optimistic about the economy this month, according to a key gauge of consumer sentiment, the University of Michigan Survey of Consumers.

The University of Michigan Surveys of Consumers rose for the first time in six months, climbing to an overall score of 60.5 in June, up from a low of 52.2 in May, which was the lowest score since 2022.

The gain ends six straight months of declines for the index. The score of 60.5 is still about 20% lower than it was last December and 11% lower than the 68.2 rating in June 2024.

“Consumers appear to have settled somewhat from the shock of the extremely high tariffs announced in April and the policy volatility seen in the weeks that followed,” Surveys of Consumers Director Joanne Hsu said. “However, consumers still perceive wide-ranging downside risks to the economy. Their views of business conditions, personal finances, buying conditions for big ticket items, labor markets, and stock markets all remain well below six months ago in December 2024. Despite this month’s notable improvement, consumers remain guarded and concerned about the trajectory of the economy.”

Consumers less pessimistic due to tariff pause

The Surveys of Consumers is broken up into two indexes – one that gauges current economic conditions and one that polls consumer expectations going forward.

The index of current economic conditions rose to 63.7, up from 58.9 in May. However, it remains 3% below the 65.9 score in the same month a year ago.

The index of consumer expectations rose to 58.4 in June, up from a score of 47.9 in May. It shows that consumers are still pessimistic, as the June score is 16% lower than June 2024 when it was 69.6.

Hsu said the trends were unanimous across a variety of demographic groups, including age, income, wealth, political party, and geographic region.

The Surveys of Consumers also probes attitudes about inflation. In June, the survey found that consumers don’t have the same fears about inflation that they did last month.

“Consumers’ fears about the potential impact of tariffs on future inflation have softened somewhat in June. Still, inflation expectations remain above readings seen throughout the second half of 2024, reflecting widespread beliefs that trade policy may still contribute to an increase in inflation in the year ahead,” Hsu said.

Specifically, consumers now expect inflation for the year ahead to be at 5.1%, down from an expectation of 6.6% inflation last month.

Over the longer term, inflation expectations fell, dropping to a rate of 4.1% from 4.2% last month. The year ahead and long-run inflation expectations are the lowest in three months.

Nonetheless, stocks were down big on Friday, with the Dow Jones Industrial Average down 850 points, or 2%, while the S&P 500 fell about 75 points or 1.2%. The Nasdaq Composite plummeted 275 points, or 1.4%, while the Russell 2000 index dropped 32 points, or 1.5%.

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