According to the university's latest Surveys of Consumers, released on June 13, there is a surprising rebound in sentiment following weeks of uncertainty surrounding tariffs and geopolitical tensions. The headline consumer sentiment index climbed to 60.5 – well above economists' expectations of 54 and marking a robust 15.9 percent increase from May's reading.

"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," Joanne Hsu, survey director, said. "However, consumers still perceive wide-ranging downside risks to the economy."

The details of the report reflected across-the-board improvements. The current conditions index rose by 8.1 percent, indicating consumers feel more confident about their present financial situations. More notably, the expectations index, seen as a predictor of future economic activity, soared by 21.9 percent, pointing to a rebound in consumer optimism.

Despite the gains, sentiment levels remain well below those recorded a year ago, highlighting ongoing public concerns over the long-term impacts of elevated tariffs and other global uncertainties.

Still, one of the most encouraging signs in the report was a steep drop in near-term inflation expectations. The one-year inflation outlook fell to 5.1 percent, down 1.5 percentage points and the lowest level since early 2023. The five-year outlook saw a marginal decrease to 4.1 percent.

"Consumers' fears about the potential impact of tariffs on future inflation have softened somewhat in June," Hsu noted. "Still, inflation expectations remain above readings seen throughout the second half of 2024, reflecting widespread beliefs that trade policy may still contribute to an increase in inflation in the year ahead."

Economists will be watching closely to see if these early signs of optimism can be sustained, especially as negotiations continue to unfold in the global trade arena. The final June reading from the Michigan survey is due later this month.