The US-Iran agreement has pushed down oil prices and transmitted the effect to the end market: In June, Michigan consumer confidence hit a trough and rebounded, but it still remains at a historic low.

Gasoline price declines are providing a slight respite for inflation-weary American households, lifting consumer confidence from historic lows, but overall sentiment remains fragile as high price pressures persist.

Data released Friday by the University of Michigan showed the final consumer sentiment index for June rose to 49.5, up from May’s record low of 44.8 and also better than the preliminary reading, yet still the second-lowest level since the index began in the 1970s.

Meanwhile, consumers' one-year inflation expectations fell back from 4.8% to 4.6%, while five-to-10-year inflation expectations also declined to 3.3%, erasing last month’s gains.

Survey director Joanne Hsu noted that the improvement in consumer sentiment was broad-based across income groups and political affiliations, but "the cost of living remains consumers' top concern," with more than half of respondents spontaneously mentioning that high prices are dragging down their personal finances.

Even so, data released earlier this week showed that inflation-adjusted consumer spending accelerated in May, suggesting that overall household demand remains resilient.

Gasoline Price Drop Boosts Confidence, High Inflation Pressure Lingers

In recent weeks, the average U.S. gasoline price has fallen by more than 60 cents per gallon, becoming a key driver of this rebound in sentiment. However, inflation remains at a three-year high, gasoline prices are still far from pre-war levels, and household budgets remain strained.

The current conditions sub-index recovered in June but remains near historic lows. The index measuring consumers' perceptions of their personal financial situation improved from May but is still close to its lowest level since 2009. Willingness to purchase durable goods also remains depressed.

On the outlook front, U.S. consumers' views on their own financial prospects and the medium-to-long-term economic trajectory have both improved. The University of Michigan's expectations sub-index climbed to a three-month high.

Outlook Improves, Iran Situation May Have Limited Short-Term Impact

Hsu said that survey data suggest consumers generally believe the economic impact of the Iran war may be limited to the short term.

According to media reports, a temporary U.S.-Iran agreement has restored shipping traffic through the Strait of Hormuz, increasing crude oil supply and pushing prices lower. Despite a container ship being attacked on Thursday, cargo passage through the strait continues for now.

However, the effects of rising transportation and raw material costs may gradually pass through to end consumers in the coming months, leaving households exposed to price increases for a wide range of goods. The survey period was May 19 to June 22.

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