Consumer Sentiment Tumbles In June, Reaches 7-Month Low: ‘High Prices As Well As Weakening Incomes’ Raise Concerns – SPDR S&P 500 (ARCA:SPY), iShares Russell 2000 ETF (ARCA:IWM)

Preliminary estimates from the University of Michigan indicate a sharper-than-expected decline in U.S. consumer confidence in June, reaching its lowest point in seven months.

The survey also showed that inflation expectations remain largely unchanged, suggesting that the decreased consumer sentiment has not led to a perception of reduced price pressures in the coming years.

University of Michigan Consumer Sentiment Report For June: Key Highlights

• The University of Michigan consumer sentiment index fell from 69.1 in May to 65.6, sharply missing Econoday’s market consensus predictions of 73. It marks the lowest consumer morale since November 2023.
• The sub-index for consumer expectations eased from 68.8 to 67.6, below the expected 70.
• The sub-index for current conditions tumbled from 69.6 to 62.5, below the predicted 71.
• The year-ahead inflation expectations were unchanged at 3.1%. Long-term inflation expectations edged slightly higher from 3% to 3.1%.

Economist Takeaways

“Assessments of personal finances dipped, due to modestly rising concerns over high prices as well as weakening incomes. Overall, consumers perceive few changes in the economy from May,” University of Michigan’s Surveys of Consumers Director Joanne Hsu, said.

Year-ahead inflation expectations remained steady at 3.3% this month, which is higher than the 2.3-3.0% range observed in the two years preceding the pandemic.

Long-term inflation expectations slightly increased from 3.0% last month to 3.1% this month.

Although long-term expectations have been notably stable over the past three years, they “remain elevated relative to the 2.2-2.6% range seen in the two years pre-pandemic,” Hsu added.

Market Reactions

Wall Street hovered in the red Friday, after major indices, such as the S&P 500 and the Nasdaq 100, hit record high closes on Thursday.

The SPDR S&P 500 ETF Trust SPY fell following the report, extending the session decline to 0.4%. Small caps also witnessed a drop, with the iShares Russell 2000 ETF IWM down 1.7% for the day.

Investors flocked to safe havens again, with the bond yields down across all maturities. The iShares 20+ Year Treasury Bond ETF TLT rose 0.9%, and by 3.5% for the week, eyeing the strongest weekly performance since December 2023.

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