The University of Michigan (UoM) is set to release its preliminary estimate for June’s Consumer Sentiment Index, with expectations that consumer confidence will remain depressed near historical lows due to elevated inflation and rising energy prices [1]. The index is forecasted to edge up slightly to 46.0 in June from May’s record low of 44.8, marking the lowest confidence levels since records began in 1952 and reflecting a more pessimistic outlook than during the 1970s Oil crisis, the 2008 recession, or the COVID pandemic [1].
Similarly, the UoM Consumer Expectations Index is anticipated to remain near historic lows, with a marginal increase to 44.3 from May’s 44.1 reading [1]. The persistent weakness in consumer sentiment is attributed to the higher cost of living, exacerbated by the war in Iran and the subsequent blockade of the Strait of Hormuz, which have driven energy prices higher and increased costs across a broad range of goods and services [1].
The May survey highlighted that 57% of consumers spontaneously mentioned that high prices were eroding their personal finances, up from 50% in the previous month, according to Joanne Hsu, director of the University of Michigan’s Surveys of Consumers [1]. This concern is supported by the latest US Consumer Price Index (CPI) data, which showed prices accelerating to a 4.2% year-on-year pace in May—the highest since April 2023—with energy prices surging by 23.5% over the past year [1].
Given that consumption accounts for about 70% of US GDP, the Michigan Consumer Sentiment Index is viewed as a reliable forward-looking indicator of US economic trends, and its release tends to have a significant impact on the US Dollar (USD) [1]. If the preliminary figures align with market consensus, attention may shift to the economic consequences of persistent inflation, potentially dampening optimism generated by recent strong Nonfarm Payrolls and robust services and manufacturing data [1].
CONCLUSION
US consumer sentiment is expected to remain near record lows in June, reflecting ongoing concerns about inflation and rising energy costs. The data underscores the significant pressure on household finances and could have a notable impact on the US Dollar and broader economic outlook. Market participants are likely to focus on the implications of persistent inflation for future economic trends.