US consumer sentiment hit by concerns about impact of tariffs

US consumer sentiment improved less than initially estimated in June amid concerns about the impact of a trade war, according to a final reading from the University of Michigan.

The consumer sentiment index rose to 98.2 from 98.0 in May and 95.0 in June last year, coming in below the flash reading of 99.3 and expectations for a reading of 99.0.

The current economic conditions index increased to 116.5 in June from 111.8 the month before and 112.4 in the same month a year ago.

Meanwhile, the index of consumer expectations declined to 86.3 this month from 89.1 in May, but was up from 83.8 in June 2017.

Surveys of Consumers chief economist Richard Curtin attributed the decline largely to worries about the potential impact of tariffs on the domestic economy.

"The potential impact of tariffs on the domestic economy was spontaneously cited by one-in-four consumers, with most expecting a negative impact on the domestic economy (21% out of 26%). The primary concerns were a downshift in the future pace of economic growth and an uptick in inflation. A longstanding belief of consumers is that trade with other countries results in a broader range of available goods at lower prices. When asked in a recent survey about their views on international trade, two-thirds of consumers thought that more trade with other countries would be better for the domestic economy.

"To be sure, consumers' judgements about the impact of higher tariffs will not crystalise until they gain more experience with actual changes in product prices and domestic employment. While tariffs may have a direct impact on only a very small portion of overall GDP, the negative impact could quickly generalize and produce a widespread decline in consumer confidence."