UMich Inflation Expectations Crash In June; Sentiment Rebounds

After last month’s rise in medium-term inflation expectations to its highest in 15 years, expectations from UMich’s survey were for a small pullback in preliminary June data. As it turns out, expectations were right in direction but the magnitude is off the charts as 1-year inflation expectations crashed from 4.2% to 3.3% (exp 4.1%). Longer-term inflation expectations also slipped back from 15 year highs…

Source: Bloomberg

The headline sentiment data was expected to show a modest pickup in preliminary June data – against the recent trend of deterioration – and it did,  reaching its highest level in four months.

Source: Bloomberg

As Joanne Hsu, director of the survey, said this “reflects greater optimism as inflation eased and policymakers resolved the debt ceiling crisis.”

The outlook over the economy surged 28% over the short run and 14% over the long run. Sentiment is now 28% above the historic low from a year ago and may be resuming its upward trajectory since then.

Buying Conditions bounced notably in the early June survey…

As it stands, though, sentiment remains low by historical standards as income expectations softened. A majority of consumers still expect difficult times in the economy over the next year.