McCarthy Debt Deal Helps Consumer Sentiment Reach Best Levels in Four Months

Consumer sentiment went up dramatically in early June as the debt limit crisis was handled under House Speaker Kevin McCarthy's leadership.

The consumer mood index at the University of Michigan increased by 8 percent from May to 63.9. Both the existing state of affairs and the outlook for the future have improved.

“The outlook over the economy surged 28 percent over the short run and 14 percent over the long run. Sentiment is now 28 percent above the historic low from a year ago and may be resuming its upward trajectory since then,” Joanne Hsu, the director of the survey, said in a statement.

Despite the increase, sentiment remains historically low. According to Hsu, the majority of customers still anticipate the economy to struggle in the coming year.

Income expectations fell from the previous month's estimate, but so did inflation predictions. Inflation expectations for the coming year have dropped to 3.3 percent from 4.2 percent, the lowest since March 2021.

Long-term inflation forecasts remained unchanged from May, standing at 3.0 percent. For the previous 23 months, inflation expectations have been in the 2.9 percent to 3.1 percent area, much higher than the 2.2 percent to 2.6 percent range in the two years preceding the pandemic.

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