US Consumer Confidence Improves in June – UoM
US consumer sentiment improved in June after falling gasoline prices provided some relief for households still facing high inflationary pressures. The University of Michigan's consumer sentiment index rose to 49.5 on Friday (June 26th) from a record low of 44.8 in May.
This increase indicates that falling energy prices are starting to help improve household confidence. Average gasoline prices have fallen more than 60 cents per gallon in recent weeks, helping to ease pressure on Americans' daily spending.
Despite the improvement, consumer sentiment remains the second-lowest level since data began in the 1970s. This means that the pressure on people's purchasing power has not completely disappeared. University of Michigan survey director Joanne Hsu said the cost of living remains a top concern for consumers, with more than half of respondents spontaneously citing high prices as a burden on their personal finances.
Inflation expectations have also eased slightly. Consumers expect prices to rise 4.6% over the next year, down from 4.8% in May. Meanwhile, inflation expectations for the next five to ten years fell to 3.3%, erasing the spike seen in the previous month.
Although gasoline prices have begun to fall, household budgets remain tight. Inflation is at a three-year high, while fuel prices are slowly returning to pre-war levels. The survey's current conditions index also rose in June but remains near a record low.
Consumer perceptions of personal finances also improved from May, but remain near their weakest level since 2009. This indicates that households remain cautious about spending, especially on durable goods that require significant outlays.
Nevertheless, US household demand has so far shown resilience. Data this week showed inflation-adjusted consumer spending rose in May. This indicates that, despite low sentiment, consumption has not completely weakened.
In terms of prospects, consumers' views of future financial conditions and the economy over the next few years have also improved. The University of Michigan's expectations index rose to its highest level in three months. According to Hsu, this figure indicates that consumers perceive the economic impact of the Iran war as likely to be short-term.
The interim agreement between the United States and Iran has also helped increase shipping through the Strait of Hormuz, increasing oil supplies and lowering energy prices. Despite an attack on a container ship on Thursday, traffic through the waterway continues.
However, US households are still likely to face price increases for several goods in the coming months. Previously high transportation and raw material costs could continue to flow through to consumer prices. Therefore, despite improving sentiment, cost-of-living pressures remain a major risk to the US consumption outlook. (arl)
Source: Newsmaker.id
