Background on the Consumer Confidence Index
The University of Michigan’s Consumer Sentiment Index measures how optimistic or pessimistic consumers are regarding the U.S. economy’s health for the near future.
Who is Donald Trump and why is he relevant?
Donald Trump served as the President of the United States from January 2017 to January 2021. His administration was marked by protectionist trade policies, including the imposition of tariffs on various goods and materials.
June’s Recovery in Consumer Confidence
In June, the University of Michigan’s Consumer Sentiment Index rose to 60.5 points, marking the first increase in six months from May’s 52.2 points.
Reasons for the Improvement
- Consumers have regained some confidence following the initial shock of Trump’s broad tariffs announced in April.
- The volatility in politics during the weeks following the tariff announcements has subsided somewhat.
Lingering Economic Concerns
Despite the recovery, consumer confidence remains low compared to December 2019 levels, approximately 20% below those readings.
- Consumers are worried about business conditions and personal finances.
- Their perceptions of the economy, business environment, personal finances, labor market, and stock market remain significantly lower than six months ago.
Trump’s Trade Policies and Their Impact
In April, Trump’s administration imposed a 10% tariff on most U.S. trading partners. More stringent tariffs were set to take effect in July for numerous economies unless extended.
- Trump also enforced heavy duties on steel, aluminum, and automobile imports.
- These actions disrupted financial markets, supply chains, and consumer confidence.
Moderate Inflation Impact
Although tariffs have caused some inflation, the effect has been moderate so far. Companies are relying on existing inventories, and Trump has softened his stance on some punitive tariffs.
Expert Insights
Joanne Hsu, Director of the Consumer Sentiment Survey, commented on the recent developments:
- “Consumers appear to have recovered somewhat from the uproar caused by Trump’s high tariffs announced in April and subsequent political volatility.”
- “However, consumers perceive a wide range of downside risks for the economy.”
- “Consumer opinions on business conditions, personal finances, labor market, and stock market remain very low compared to six months ago.”
- “Despite this month’s notable improvement, consumers are still cautious and concerned about the economy’s trajectory.”
