U.S. consumer sentiment cooled in June from an eight-month high on less optimism about the economic outlook in the wake of slower global growth and trade concerns. Households' long-term inflation expectations also retreated.

The University of Michigan's final sentiment index dropped to 98.2, slightly above the median forecast in a Bloomberg survey of economists, from 100 a month earlier, a report showed Friday. The gauge of expectations decreased to 89.3 from a 15-year high in May, while an index of current conditions climbed to 111.9 from 110. Five years ago in June 2014 under President Barack Obama, the index was at 82.5.

Key Insights

• The June expectations figure was higher than the preliminary reading of 88.6 as President Donald Trump rescinded a threat to place tariffs on Mexican goods unless the nation did more to thwart illegal border crossings into the U.S. Nonetheless, angst over the Trump administration's trade policies and the impact on business activity is a continuing theme.
• The Michigan measure of sentiment remains elevated, not far from last year's peak of 101.4, the highest since early 2004. The decline in June was due to households with incomes in the top third of the distribution, which may reflect concerns about how the trade war will affect their stock portfolios.
• Inflation expectations for the next five to 10 years declined to 2.3% from 2.6% in May. The figure compares with a preliminary June reading of 2.2%. Subdued inflation is one of the reasons investors are betting the Fed will lower interest rates this year. Policy makers next meet on July 30-31.
• A separate report Friday showed solid gains in U.S. personal spending and incomes in May, while inflation appeared to be picking up. Meanwhile, a Chicago-area purchasing managers' index dropped to a three-year low.

Official's View

“Most of the June slippage was concentrated in prospects for the national economy, with the unemployment rate expected to inch upward instead of drifting downward in the year ahead,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement.

More Insights

• Consumers anticipate slower gains in prices in the year ahead. Inflation expectations for the next 12 months fell to 2.7% from 2.9% in May. The preliminary June reading was 2.6%.
• Buying attitudes toward durable goods rose in June to the highest in six months, mainly due to those with incomes in the bottom two-thirds.
• Home-buying sentiment improved on the heels of lower mortgage rates and confidence about future incomes.
• Fifty-three percent of all households surveyed reported improved finances, and 44% expect financial gains in the coming year.

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