(Bloomberg) -- US short-term inflation expectations fell in early June to a more than two-year low, helping drive consumer sentiment higher.
Americans expect prices will climb at an annual rate of 3.3% over the next year, down from the 4.2% expected in May, according to the preliminary June reading from the University of Michigan.
The sentiment index increased to a four-month high of 63.9, also helped by an agreement to resolve the debt-ceiling crisis, the report showed Friday. The median estimate in a Bloomberg survey of economists called for a reading of 60.
Despite the increase in sentiment, Americans grew more concerned about their incomes, the report showed. The labor market, which has long supported strong consumer spending, has come more into balance in recent months, which means workers are no longer seeing the robust wage gains from the past years.
“Sentiment is now 28% above the historic low from a year ago and may be resuming its upward trajectory since then,” Joanne Hsu, director of the survey, said in a statement. “As it stands, though, sentiment remains low by historical standards as income expectations softened.”
The report indicated more concern among consumers about the labor market.
Declines in short-run inflation expectations were visible across age, income and education groups, according to the university. They see costs rising 3% over the next five to 10 years, compared to last month’s 3.1%.
The current conditions gauge rose to 68 from 64.9. A measure of expectations advanced to a four-month high of 61.3.
A gauge of buying conditions for durable goods jumped this month to the highest level since August 2021. Consumers’ perception of their current financial situation was the weakest this year.