The final University of Michigan consumer sentiment index for June is up to 64.4, an upward revision from 63.9 in the preliminary report and above 59.2 in May. The final June reading is above the consensus of 63.9 in the Econoday survey of forecasters. Consumers remain gloomy, but less so than in much of the last year. There are signs of relief for upward price pressures, the pace of increases to interest rates has eased and perhaps nearing its conclusion, and the labor market feels less threatened by the prospect of a recession soon. However, confidence remains well below its near-term peak of 101.0 in February 2020 just before the pandemic began to impact economic conditions in earnest and which since then has been injured by steep inflation and a worrisome geopolitical outlook.

The current condition index is up to 69.0 in June after 64.9 in May and its highest since 70.7 in February. Consumers are experiencing a lifting of inflation pressures for food and energy, and even some easing in the upward trajectory of shelter costs. The future conditions index is up to 61.5 in June from 55.4 in May and is the highest since 64.7 in February. The worries associated with the banking sector are fewer, and hopes that the FOMC is at or near the end of the rate tightening cycle are higher.

The 1-year inflation expectations measure is down sharply to 3.3 percent in June after 4.2 percent in May and 4.6 percent in April. Gasoline prices are generally at more affordable levels and some of the short-term increases in food prices such as for eggs and poultry are ebbing. The 5-year inflation expectations measure which is closer to the Fed's medium term is essentially unchanged at 3.0 percent in June after 3.1 percent in May and 3.0 percent in April. Fed policymakers are going to interpret this as stability in consumers' inflation outlook which in turn suggests confidence that the FOMC will be able to return inflation back to the 2 percent flexible average inflation target over time.

Consumer sentiment is expected to end June at 63.9, unchanged from June's mid-month flash and up nearly 4 points from May.

The University of Michigan's Consumer Survey Center questions households each month on their assessment of current conditions and expectations of future conditions. Preliminary estimates for a month are released at mid-month and are based on about 420 respondents. Final estimates are released near the end of the month and are based on about 600 respondents.

The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

This balance was achieved through much of the nineties and, in large part because of this, investors in the stock and bond markets enjoyed huge gains. It was during the late nineties that the consumer sentiment index hit its historic peak, reaching levels that were never matched during the subsequent 2001 to 2007 expansion nor during the long expansion following the Great Recession.

Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.