US Consumer Sentiment Jumps to Four-Month High on Debt-Cap Deal

People shop during Black Friday in Arcadia, Calif., on Nov. 25, 2022. Frederic J. Brown/AFP via Getty Images

Declining fears over inflation lifted American consumers’ spirits this month.

U.S. consumer sentiment reading rebounded in June following a decline in May, after concerns over the debt-ceiling crisis faded and investor were buoyed by a strong labor market and stock market gains due to artificial intelligence (AI).

Consumers’ near-term inflation expectations dropped to more than a two-year low this month, while the outlook for the next five years improved slightly, according to the University of Michigan’s Survey of Consumers, published on June 16.

The university survey followed the release of the Department of Labor’s Consumer Price Index (CPI) and Producer Price Index (PPI) this week, which showed annual consumer and producer prices declining in May, mainly due to falling energy costs.

The Federal Reserve on June 14 decided to not hike interst rates this month, but signaled two future, additional hikes of 25 basis points each, to raise interest rates to a range of 5.50–5.75 by the end of 2023.