The University of Michigan's headline Consumer Sentiment Index slumped to 50.2 in June, its worst level since records began back in the 1970s, according to the preliminary release of the university's widely followed monthly consumer survey. That was a large miss on the expected slight decline to 58.0 from 58.4 in May. 

The Consumer Expectations Index fell to 46.8 from 55.2 in May, well below the expected decline to 54.5 and also a new record low. Meanwhile, the Current Conditions Index fell to 55.4 from 63.3, well below the expected decline to 62.5, its worst level since May 1980. One-year inflation expectations rose to 5.4% from 5.3% in May, while five-year inflation expectations jumped to 3.3% from 3.0%.     

Market Reaction

The latest weak consumer sentiment figures and rise in inflation expectations have exacerbated some of the moves triggered in wake of the hotter-than-expected US inflation data. Equity market downside has worsened and US bond yields are extending to the upside, which is dragging the US dollar higher with it as traders price in a more stagflationary US economy (weaker growth, but higher inflation and a still hawkish Fed).