The numbers: The second and final reading of the consumer sentiment index from the University of Michigan fell to 85.5 in June from an initial reading of 86.4, but remained higher than the May’s 82.9 figure.
Economists polled by the Wall Street Street Journal had expected a reading of 86.5.
What happened: Though weaker than forecast, consumers remain more optimistic than they were in May, boosted by those who make more than $100,000 annually, the survey shows.
Investors may be soothed by the data indicating year-ahead inflation expectations fell from May’s peak of 4.6% to 4.2% in June. At the same time, that figure was higher than June’s initial estimate of 4.0%, suggesting many consumers remain cautious on this front.
An index that measures current conditions fell to 83.5 in the final June reading, from May’s 89.4 print.
The index that measures expectations for the next six months rose to 83.5 from 78.8 last month.
Big Picture: Consumer sentiment continues to recover in fits and starts, with elevated inflation expectations still weighing on Americans’ feelings about the economy, despite the slight decline from May’s decade high.
Though more well-off Americans are brushing aside inflation concern, the majority making less than $100,000 remain wary that prices will continue to rise.
The uneven growth in Friday’s report follows a recent report from the private Conference Board, which reported a decline in confidence in May for the first time in six months.
The improvement over May was largely due to Democrats expecting conditions to improve. This was offset somewhat by a more pessimism among Republicans.
What UMich said: “All of the June gain was among households with incomes above $100,000, and mainly in the way they judged future economic prospects,”said Richard Curtin, chief economist of the University of Michigan’s survey.
“Consumers continued to pay close attention to three critical factors: inflation, unemployment, and interest rates,” he added. “Not only did year-ahead inflation expectations fall slightly to 4.2% in June from May’s decade peak of 4.6%, consumers also believed that the price surges will mostly be temporary.”
Market reaction: U.S. stocks remained mixed following the report, with the Dow Jones Industrial Average DJIA, +0.69% up about 0.6%, the S&P 500 SPX, +0.28% rising 0.2%, while the Nasdaq Composite Index was flat. COMP, +0.02%