Stock Trade Market

Stock market crash concerns are back in vogue after a surprisingly pessimistic June consumer sentiment report. Indeed, per the University of Michigan’s Survey of Consumers, released today, U.S. sentiment reached 65.6 in June, down from 69.1 in May, and the lowest reading for the index in seven months.

Despite relatively promising recent economic data, stubborn inflation continues to weigh on consumers.

“Assessments of personal finances dipped due to modestly rising concerns over high prices as well as weakening incomes,” said Joanne Hsu, Director at Survey of Consumers. “Overall, consumers perceive few changes in the economy from May.”

For the past year, both interest rates and inflation have been higher than preferred. With unemployment starting to rise, only slightly for now, it seems many Americans are starting to perceive increased macroeconomic pressures.

“The press release noted that consumers were still concerned about high prices, and year-ahead inflation expectations remained at 3.3%,” Olivia Cross, an economist at Capital Economics, noted. “That is at odds with price developments for essentials, given that gasoline prices have eased back and we learned this week that the CPI food at home index was unchanged in May.”

Today’s consumer sentiment report comes following a surprisingly cool May consumer price index (CPI) inflation report released on Wednesday. Indeed, headline inflation jumped 3.3% last month compared to a year ago, the lowest CPI reading since July 2022.

The producer price index (PPI), which was also released this week, was also lower than expected. Wholesale prices tend to pass over to consumers, so a cooling PPI report could be a promising indicator of disinflation to come.

Falling Consumer Sentiment Fuels Stock Market Crash, Recession Concerns

Falling consumer sentiment plays into a growing divide between economic data and Americans’ actual feelings about the economy.

On paper, it appears that the economy is humming along rather nicely. Spending has held on strong this year, the labor market remains robust, and inflation is at a third of the level it was just two years ago (albeit still higher than preferred). Even the stock market has performed well this year, with the S&P 500 up nearly 14.5% just six months into the year.

Despite this, many Americans have expressed dissatisfaction with the economy.

“People experience what they experience,” Federal Reserve Jerome Powell said earlier this week. “All I can tell you is what the data show, which is, we’ve got an economy that’s growing at a solid pace. We’ve got a very strong labor market with unemployment at 4%. It’s been a long time since we’ve had, you know, a long stretch of time with unemployment at or below 4%, very long time.”

It’s unclear what’s fueling this dissonance, but it’s affecting consumers in very real ways.

On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.