Hear That? That’s Consumers Breathing Sighs of Relief on Economy as Inflation Eases

Consumers are feeling better about the economy as inflation has eased and the debt ceiling debate has ended.

The University of Michigan's consumer sentiment index rose 8% in June from 59.2% in May to 63.9%.

Consumers' outlook for the economy jumped 28% over the short run and 14% over the long run, according to the university's monthly survey. Sentiment is now 28% above the historic low it reached a year ago and may continue to rise, according to the report out Friday.

Consumers are especially feeling better about about inflation, as some staples show a drop in prices like eggs and gasoline. Their inflation expectations for the year ahead dropped for the second consecutive month, falling to 3.3% in June from 4.2% in May. That's lowest since March 2021.

Inflation, as measured by the consumer price index, fell to 4% in May, less than half of its June 2022 peak of 9.1%. Consumers are also feeling better about a decline in egg prices, which have come to symbolize the inflationary cycle.

Still, consumer sentiment remains historically low. A majority of consumers continue to foresee difficult times in the economy over the next year amid softening income expectations.