Americans are feeling more optimistic about the economy despite ongoing challenges with import tariffs, as reflected in a recent survey. The University of Michigan's consumer sentiment index showed a significant rise of 16%, moving to 60.5 in June from 52.2 in May. This uptick comes as the public begins to adjust to the broad import tariffs that President Donald Trump aims to enforce with key trading nations.
Inflation expectations over the next year have decreased, although they remain higher than current inflation levels. The survey’s director highlighted that consumer sentiment has improved for the first time in six months, although it still trails figures from December 2024, when there was a notable post-election boost. Improvements were seen consistently across demographics and political affiliations, with expectations for business conditions showing a notable rise.
Despite the positive shift, consumers continue to perceive significant economic risks, affecting views on business conditions, personal finances, and market conditions. This sentiment persists as President Trump has recently altered his approach to tariffs, opting for targeted negotiations instead of broad measures. A preliminary agreement with China suggests that exports of key minerals to the U.S. will continue, but tariffs remain higher than before.
Economic resilience is evident, though job growth has slowed, with employers adding 139,000 jobs in May, surpassing expectations despite tariffs. This has left the Federal Reserve cautious, with no immediate plans to alter interest rates although a rate cut might be considered in September.
Economic growth is expected to continue modestly, buoyed by the administration's pro-growth policies, though threats from tariffs and potential inflation spikes remain. While inflation has been tempered by lower energy costs, recent geopolitical tensions have caused oil prices to rise, adding to future inflation uncertainties. Despite these challenges, the current inflation rate is 2.4%, but expectations remain at 5.1% for the year ahead.
