Consumers are starting to feel better about the trajectory of the US economy as President Trump has dialed back some of his most aggressive stances on tariffs and Americans come to terms with the economic reality that tariffs are here to stay.
The latest University of Michigan survey released Friday showed sentiment increased for the first time since December 2024, with the index rising to a reading of 60.5, above the 52.2 seen last month and the 53.6 expected by economists. The increase came after May recorded one of the lowest readings on record.
“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,” Survey of Consumers director Joanne Hsu wrote in the release.
Pessimism over the inflation outlook lessened in June, as one-year inflation expectations plunged to 5.1% from the more than four-decade high of 6.6% reached in May.
Long-run inflation expectations, which track expectations over the next five to 10 years, also fell, hitting 4.1% in June, down from 4.2% in May.
Read more: What is consumer confidence, and why does it matter?
Still, Hsu noted that consumer views of business conditions, personal finances, labor markets, stock markets, and buying conditions for big-ticket items all remain below where they were in December.
“Despite this month’s notable improvement, consumers remain guarded and concerned about the trajectory of the economy,” Hsu said.
In April, the estimated US effective tariff rate peaked around 27%, significantly higher than the 2.5% rate entering the year. But following pauses on many of Trump’s “reciprocal” tariffs and a 90-day pause on duties placed on China, JPMorgan now estimates the US effective tariff rate is closer to 14%.
The rise in the University of Michigan’s June survey follows a similar signal from May’s Consumer Confidence reading from The Conference Board.
The latest index reading from The Conference Board was 98 in May, well above the 85.7 seen in April and the 87.1 economists had expected. The expectations index surged off its 13-year low seen in April, reaching 72.8 in May, far above the 55.4 in the month prior. This marked the largest month-over-month increase for that metric since May 2009.
Read more: What Trump’s tariffs mean for the economy and your wallet
In a research published on June 6, Goldman Sachs chief US equity strategist David Kostin pointed out that so-called soft economic data, which covers data points like consumer surveys, usually hits its cycle bottom before hard economic data, like monthly readings on inflation or jobs.
Kostin’s work shows the S&P 500 typically will follow the soft data’s return higher, even if hard economic data continues to move lower.
“S&P 500 returns are currently more correlated with soft data than hard data,” wrote Kostin, who projects the S&P 500 will hit 6,500 in the next 12 months.
“If the recovery in soft data is sustained, it should support equity returns even as hard data weaken.”
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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