US consumer sentiment improves more than expected in June

The index of consumer sentiment rose to a three-month high of 99.3 from 98.0 in May and 95.0 in June 2017. This was above the 98.5 reading economists had pencilled in.

Meanwhile, the index for current conditions increased to 117.9 from 111.8 in May and 112.4 in June last year.

Finally, the index of consumer expectations fell to 87.4 this month from 89.1 in May but was up from 83.8 in June 2017.

Surveys of Consumers chief economist, Richard Curtin, said: "The sharpest divide was between the record number of households who mentioned recent income gains and the highest expected year-ahead inflation rate since 2015. At some point in every economic expansion, favourable income and job prospects act to offset higher inflation and interest rate expectations.

"Only when inflation and interest rates are expected to persistently exceed income and job prospects will consumers begin to curtail their discretionary spending. Indeed, greater certainty about future income and job prospects have become the main drivers of more favourable purchase plans."

Pantheon Macroeconomics economist Ian Shepherdson pointed out that all the headline increase was due to a jump in the current conditions index, which usually tracks the jobless claims, which continue to improve.

"Overall, consumers remain very confident by historical standards, but they have nothing like enough cash flow to drive spending up in line with sentiment in the usual way. The gap between confidence and spending is unlikely to narrow appreciably in the foreseeable future. Finally, note that both 12-month and 5/10-year inflation expectations rose a tenth in June, to 2.9% and 2.5% respectively. Both remain shy of their cycle highs, but they are rising."