Market News

(Bloomberg) -- US consumer sentiment rose in early June for the first time in four months as lower gasoline prices provided some relief for Americans grappling with a surge in inflation.

The University of Michigan’s preliminary sentiment index increased to 48.9 in June from a record low 44.8 in May, according to the survey released Friday. That was higher than most economists in a Bloomberg survey expected, but it’s still the second lowest reading in data back to the 1970s.

Consumers expect prices to rise at an annual rate of 4.6% over the next year, down from 4.8% in May. They also saw costs rising at an annual rate of 3.4% over the next five to 10 years, erasing the prior month’s jump.

While gasoline prices are still above pre-war levels, the drop seen in recent weeks led Americans to be less pessimistic about their personal finances. The report showed a notable improvement among lower-income consumers, who typically allocate a larger share of their budget to fuel.

Even so, overall sentiment remains depressed amid the Iran war and the wave of inflation it sparked. Separate data out earlier this week showed consumer prices rose 4.2% in May from a year earlier, the most in more than three years.

“Despite the mild reprieve, elevated gas prices remain highly salient to consumers,” Joanne Hsu, director of the survey, said in a statement. “Thus, the current level of gas prices continues to be broadly unacceptable to consumers and dampens their views of the economy.”

A gauge of consumers’ perceptions of their personal finances increased but remained close to levels not seen since 2009. Nearly half of respondents expect interest rates to rise in the year ahead, the report showed. That’s up from 25% before the war with Iran.

The current conditions gauge also rose but held close to a record low. The expectations index climbed to a three-month high of 49.3.

President Donald Trump pulled back Thursday on threatened military strikes against Iran, claiming that a deal was close. But even if there’s a resolution soon, households could face further price hikes in coming months as rising costs of materials and transportation work through supply chains.

The survey period includes responses from May 19 to June 8.

--With assistance from Maya Prakash.