Inflation concerns ease, American consumer confidence sees strong rebound

With the easing concerns about the economy and significant improvement in short-term inflation expectations, US consumer confidence saw the largest monthly increase since January 2024 in June. According to preliminary data released by the University of Michigan on Friday, the Consumer Confidence Index jumped 8.3 points in June to reach 60.5, far exceeding all expectations of economists in foreign media surveys. This marks the first increase in the index this year, reflecting a slight relief among the public about the economic outlook, especially the anxiety over President Trump's protectionist trade policies. In terms of inflation expectations, consumers expect a 5.1% increase in prices in the next year, significantly lower than the 6.6% in May, marking the largest single-month decrease since October 2001. For long-term inflation, respondents anticipate an average annual inflation rate of 4.1% in the next 5 to 10 years, slightly down 0.1 percentage point from May. Joanne Hsu, head of the University of Michigan's Consumer Survey, commented: "Consumers seem to have gradually calmed down from the high tariffs announced in April and the political turmoil in the following weeks. However, they still believe that the economy faces widespread downside risks." The survey also showed a significant increase in consumers' expectations index by 10.5 points to 58.4, marking the largest increase since December 2023; the assessment of the current economic situation also rose from 58.9 to 63.7, hitting a new three-month high. However, despite this improvement, consumers' views on the business environment, personal finances, and large expenditures are still lower than the levels at the end of last year. Nevertheless, this improvement in consumer sentiment injects a bit of optimism into the market and may help alleviate concerns among businesses and economists about consumer spending and economic growth prospects. Recent inflation pressures in the United States remain mild, with core inflation excluding food and energy rising by only 0.1% in May, further confirming overall price stability. This survey was conducted between May 27th and June 9th, just before the announcement by the US and China to maintain existing tariff levels in their trade agreement. Although the agreement did not completely resolve the trade dispute, it did to some extent eliminate short-term uncertainties. It is worth noting that consumer confidence has increased across all political affiliations. The confidence level among Republican supporters rose to the highest since October 2020, while Democrats and independents also saw confidence levels reaching a three-month high, showing a widespread trend of improved sentiment.