The
University of Michigan’s index of US consumer sentiment declined to 82.7 in the
preliminary June reading after a print of 84.5 in May, a bit below the
consensus (84.5). The decline was driven entirely by a drop in the current
conditions index, which fell to 92.1 from 98.0 in May, while the economic
outlook index rose to 76.7 from 75.8. While a bit below the May reading, the
June report is very much in line with the levels seen toward the end of last
year before the fiscal cliff-induced drop in December. The decline in current
conditions was largely due to a decrease (to 33% from 39% last month) in the
percentage of respondents who thought that they were better off financially
than a year ago. While fewer consumers were optimistic that their financial
situation would improve in the coming year (25%, previous: 29%), just 12% of
respondents expected to be worse off over that time, the lowest level since
last October. Some of this softening was due to lower expectations of labor
markets, as the percentage of consumers expecting a decline in unemployment in
the coming year fell to 20% from 25%. Median inflation expectations rose
one-tenth for both the year ahead and the next five to ten years, to 3.2% and
3.0%, respectively. Despite the June drop, consumer confidence is on broadly
upward trend as the recoveries in the housing and labor markets continue to
take hold.