Index of Consumer Sentiment up 3.1% Month-Over-Month in June and 9.5% Year-Over-Year

The University of Michigan today (6-25-21) released its “Final” Index of Consumer Sentiment (ICS) for June. Month-over-month the ICS rose 3.1% from 82.9 in May to 85.5 in June. When compared to June 2020, the ICS increased 9.5% or 78.1 to 85.5. The Current Economic Conditions (CEC) were -0.9% lower month-over-month, 89.4% in May, compared to 88.6% in June. On a year-over-year basis the CEC was 1.7% higher, 88.6 in June 2021, compared to 87.1. The Index of Consumer Expectations (ICE) was up 6% month over month, 83.5 in June 2021 compared to 78.8 in May and 15.5% year-over-year.

In remarks prepared for the ICS, Richard Curtin, Survey of Consumers Chief Economist said, “although consumer sentiment slipped in late June, it still remained 3.1% above the May reading, and the second highest since the start of the pandemic. All of the June gain was among households with incomes above $100,000, and mainly in the way they judged future economic prospects. Consumers continued to pay close attention to three critical factors: inflation, unemployment, and interest rates. Not only did year-ahead inflation expectations fall slightly to 4.2% in June from May’s decade peak of 4.6%, but consumers also believed that the price surges will mostly be temporary. Declines in unemployment rate in the year ahead were expected by 56% of consumers, the largest proportion ever recorded in the history of the surveys. The growing strength in the economy meant that nearly three-quarters of all consumers expected rising interest rates during the year ahead, the highest proportion since 2018 when the economy was near its last peak. When the pandemic first started, consumers were quite uncertain about their job and income prospects, but reported widespread declines in market prices for homes, vehicles, and household durables. Those favorable price references have dropped to the most negative in a decade, and job and income prospects have improved, but not quite as favorable as in the last few years of the prior expansion. While many are optimistic about a gradual end to the pandemic, consumers still judged the risks from emerging COVID variants as appreciable. It is likely that consumers will not reduce their savings and wealth to pre-pandemic levels, but maintain a higher level of precautionary funds.”