After soaring in June on hopes the Trump administration will ultimately settle for less draconian tariffs, the premier gauge of US consumer moods improved slightly further during the first two weeks of July, data released on Friday showed.
61.8 on the preliminary readout for University of Michigan sentiment counted as an incremental advance from last month’s final reading, suggesting diminishing returns from Donald Trump’s conciliatory tariff stance, which anyway took a(nother) turn for the overtly adversarial in recent days.
“While sentiment reached its highest value in five months, it remains a substantial 16% below December 2024 and is well below its historical average,” survey director Joanne Hsu remarked.
As the figure reminds you, we’re just 12ppt from the record low on the Michigan headline, and nearly 40ppt from pre-pandemic levels. (COVID was to consumer sentiment what Volmageddon was to SPX market depth.)
The current conditions index, at 66.8, was up 4ppt MoM and now sits at its best levels since January, while the expectations gauge is the highest since February. But again, everything’s relative here. These aren’t good readings relative to history.
Consider, for example, that at 58.6, the expectations index remains nearly 20ppt below the long run average. The figure below gives you some historical context.
In April, that gauge hit a 45-year low courtesy of “Liberation Day.”
“Consumers are unlikely to regain their confidence in the economy unless they feel assured that inflation is unlikely to worsen, for example if trade policy stabilizes for the foreseeable future,” Hsu went on to say, adding that interviews with households “reveal little evidence that other policy developments, including the recent passage of the tax and spending bill, moved the needle much.”
(And here I thought the “big, beautiful bill” delivered “a number of important wins for households.” That’s what Buddy Hughes told me. If you can’t trust Buddy from North Carolina, who can you trust?)
On the bright side, inflation expectations in the Michigan poll continued to come down, with the year-ahead print slipping to 4.4% and the closely-watched medium-term measure falling to 3.6%.
The figure above’s a reminder: Both of those metrics spiked hard in May, with the year-ahead measure printing a truly harrowing 7.3% in the preliminary read for that month.
All in all, Friday’s sentiment update was constructive, but it was also cautious. Maybe the S&P 500’s giving Trump a green light to re-escalate on the trade front, but consumer sentiment really isn’t.
Tellingly, the mood among the top tercile of stock holders in the survey, while better, remains 17% below December levels even as the S&P is back at record highs.
