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Inflation fears ease, consumer optimism rises as economic outlook improves

By lauraharris // 2025-07-13

• New reports from the New York Fed and the University of Michigan show growing confidence in personal finances and job security, with sentiment reaching its highest point in months.
• One-year inflation expectations dropped to three percent in June, the lowest in five months, while long-term expectations remain steady or slightly lower, indicating improved price stability.
• Fewer Americans fear losing their jobs and more are willing to voluntarily leave employment – signs of renewed faith in the labor market.
• Anxiety over inflation from President Donald Trump's second-term trade policies is fading as import prices decline and overall goods inflation remains modest.
• A White House analysis shows imported goods prices fell 0.1 percent from December 2024 to May 2025, challenging predictions that tariffs would drive inflation.

New reports from the Federal Reserve Bank of New York and the University of Michigan have revealed that Americans are feeling increasingly confident about their financial futures as inflation concerns fall to their lowest level in five months and optimism about jobs and household finances climbs. The New York Fed's latest survey, released on July 8, shows that one-year inflation expectations dropped to three percent in June, down from 3.2 percent in May. Expectations for inflation over three and five years remained steady at three percent and 2.6 percent, respectively. Consumers also reported lower short-term uncertainty, suggesting more predictable household budgeting and spending habits ahead. Labor market sentiment is also improving. The average perceived probability of unemployment rising within the next year fell to 39.7 percent and the risk of personal job loss declined to 14.0 percent – the lowest level in half a year. An increase in Americans' willingness to voluntarily leave their jobs points to renewed confidence in employment prospects. These improvements come after a turbulent spring, when consumer sentiment dipped following President Donald Trump's re-election and the introduction of aggressive new tariffs. That anxiety is now easing. Easing trade tensions and a lack of immediate price spikes have helped stabilize the economic outlook. Meanwhile, the University of Michigan's Consumer Sentiment Index surged to 60.7 in June, a 16.3 percent rise from May and far above economists' expectations. Director of Consumer Surveys Joanne Hsu noted the gains were widespread, with expectations for personal finances and business conditions each rising by 20 percent or more. Hsu said that consumers are starting to feel more secure, though she added that inflation remains a lingering concern. Year-ahead inflation expectations dropped to five percent from 6.6 percent, while long-term expectations dipped slightly to four percent, still well above pre-2025 levels. (Related: U.S. economy added 139,000 jobs in May, topping expectations.) "Consumers' fears about the potential impact of tariffs on future inflation softened somewhat in June, but inflation expectations remain above readings seen in late 2024," Hsu said.

Drop in imported goods prices defies inflation fears over Trump trade policies

Meanwhile, the feared inflation surge from new trade policies has not materialized. A White House Council of Economic Advisers (CEA) report, released earlier this July, showed that from December 2024 through May 2025, import prices fell slightly by 0.1 percent, while overall goods prices rose just 0.4 percent. This decline in imported goods prices has been faster than the increase in overall goods prices since February, defying widespread predictions that trade policy under Trump's second term would contribute to accelerating inflation. The CEA used a detailed decomposition of the Personal Consumption Expenditures Price Index (PCEPI), a key inflation metric closely followed by the Federal Reserve and financial markets, to capture broad consumer spending trends. Its breakdown included both direct imports, such as finished goods bought by U.S. consumers, and indirect imports, which are components used in the production of other goods. Their analysis, which covered both durable goods (like appliances and electronics) and non-durables (such as clothing and food products), found consistent trends across categories: Imported goods have broadly deflated. "Imported goods are actually getting cheaper," said CEA Chair Steve Miran on X. Learn more about the actual state of the American economy at Bubble.news. Watch the video below where Antoni discussed how the U.S. labor market is nowhere near as robust as people thought it was. This video is from TrendingNews channel on Brighteon.com.

More related stories:

BLS jobs report shows American-born workers are losing jobs to foreign-born workers.

U.S. job market surges past projections despite looming tariff uncertainty.

Market rebounds on Trump's tariff pause, but uncertainty looms.

Sources include: YourNews.com WhiteHouse.gov Brighteon.com

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