U.S. consumer sentiment rose in early June for the first time in four months.
- Hopes of a near term US-Iran deal have helped ease overall energy prices.
- The University of Michigan’s preliminary consumer sentiment index rose to 48.9 in June from a record-low 44.8 in May.
- While sentiment improved, the June reading was still the second-lowest in data going back to the 1970s.
U.S. consumer sentiment improved in early June, as lower oil prices driven by optimism over a potential U.S.-Iran peace deal helped ease lingering economic concerns.
According to Friday's survey release, the University of Michigan's preliminary sentiment index climbed to 48.9 in June, up from May's record low of 44.8. While this result surpassed the expectations of most economists in a Bloomberg poll, it remains the second-lowest mark recorded since the 1970s.
Following the release, more defensive consumer staples stocks eked out gains, while consumer discretionary shares, which are more cyclical, remained under pressure.
The Consumer Staples Select Sector SPDR Fund (XLP) rose about 0.1%, while the consumer discretionary ETF (XLY) slipped 0.7%.
Tyson Foods (TSN). Philip Morris (PM), Constellation Brands (STZ) and Target (TGT) shares led gains, supporting wider consumer staples shares.
Fuel Costs Offer Respite
A sharp retreat in wholesale and retail energy costs served as the primary catalyst for the index bump. The survey's directors said that the visibility of tumbling gasoline prices functions as a critical psychological marker for the American public, offering immediate relief to household liquidity.
The sentiment improvement was particularly pronounced among middle-income and lower-income cohorts, who typically allocate a disproportionate share of their take-home pay to transportation and essential commuting expenses. However, despite the immediate optimism, longer-term perspectives remained tempered by structural economic challenges.
U.S. crude oil futures were down 3.4% to $84.76 per barrel and Brent futures, the international benchmark, lost 3.3% to $87.44 per barrel, as per data quoted by CNBC.
US Retail Spending Remains Strong
The rise in consumer morale aligns with separate data showing underlying resilience in hard consumer behavior. According to the latest CNBC/NRF Retail Monitor data published on Thursday, U.S. retail sales rose again in May, driven by e-commerce growth.
The transaction figures, compiled through real-time credit and debit card processing data, suggest that household demand continues to serve as an economic pillar despite elevated borrowing costs and uneven inflation. The National Retail Federation reported that ongoing spending growth reflects "consistent underlying demand," even as buyers become more calculating and price-sensitive.
XLP, XLY Retail View
Retail sentiment for the XLP was ‘bullish’ with ‘high’ message volumes, while was ‘neutral’ with ‘high’ volumes for the XLY.
