U.S. consumer sentiment continues its revival since trade tensions eased between the U.S. and China, with June's preliminary estimate coming in at 60.5 vs. May's final reading of 52.2 and 52.2 as well in April. This beat expectations for 53.5 in the Econoday survey of forecasters.

"Consumers appear to have settled somewhat from the shock of the extremely high tariffs announced in April and the policy volatility seen in the weeks that followed, the report said. However, consumers still perceive wide-ranging downside risks to the economy. Their views of business conditions, personal finances, buying conditions for big ticket items, labor markets, and stock markets all remain well below six months ago in December 2024."

The preliminary year-ahead inflation expectations declined again to 5.1 percent in June from 6.6 percent in May.

Long-run inflation expectations in June dipped to 4.1 percent from 4.2 percent last month.

A slight recovery expected in consumer spirits as the consensus sees consumer sentiment at 53.5 in the first report for June after holding at a depressed 52.2 in May from April.

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.