Gas price drop boost US consumer sentiment

After months pessimism, US consumers get optimistic on economy as gas prices fall.

June consumer sentiment index from University of Michigan revised up from preliminary 48.9 to 49.5. First sentiment improvement since Middle East conflict start February.

War block Strait of Hormuz—key energy route—for months. Oil price spike push US gas price near peak. Consumer sentiment hit record low two surveys straight. People spend more budget on fuel.

Delivery truck pump gas in Chicago, April 7. Photo: AP

Recent weeks, gas prices cool as ceasefire holds. Consumer confidence recover. GasBuddy say June 22, US average gas price drop $0.14 last week to $3.85 gallon ($1.02 liter). Sixth straight week US gas price fall, 15% below last month peak.

Yet, consumers stay pessimistic compared to pre-conflict. University of Michigan data show confidence 13% below February. Gas cool but general goods prices stay high, hurting sentiment.

"Third straight month over half surveyed say high prices pressure personal finance," Joanne Hsu, Director of Consumer Surveys at University of Michigan, say.

US Commerce Department data show May PCE index up 4.1% year-on-year—highest since April 2023. PCE is Fed favorite inflation gauge.

Mid-month meeting, Fed keep rate at 3.5-3.75%. But investors, big banks bet Fed start rate hike September, 80% chance, CME Group data show.

US economy grow 2.1% Q1 (annualized), after 0.5% growth Q4 last year. Researchers cut US growth outlook. Morgan Stanley lower Q2 GDP forecast from 2.5% to 2.1%. Goldman Sachs cut forecast 0.2 percentage points to 2.2%.