Consumers in the early part of June took a considerably less pessimistic about the economy and potential surges in inflation as progress appeared possible in the global trade war, according to a University of Michigan survey Friday.

The university’s closely watched Surveys of Consumers showed across-the-board rebounds from previously dour readings, while respondents also sharply cut back their outlook for near-term inflation.

For the headline index of consumer sentiment, the gauge was at 60.5, well ahead of the Dow Jones estimate for 54 and a 15.9% increase from a month ago. The current conditions index jumped 8.1%, while the future expectations measure soared 21.9%.

The moves coincided with a softening in the heated rhetoric that has surrounded President Donald Trump’s tariffs. After releasing his April 2 “liberation day” announcement, Trump has eased off the threats and instituted a 90-day negotiation period that appears to be showing progress, particularly with top trade rival China.

“Consumers appear to have settled somewhat from the shock of the extremely high tariffs announced in April and the policy volatility seen in the weeks that followed,” survey director Joanne Hsu said in a statement. “However, consumers still perceive wide-ranging downside risks to the economy.”

To be sure, all of the sentiment indexes were still considerably below their year-ago readings as consumers worry about what impact the tariffs will have on prices, along with a host of other geopolitical concerns.

On inflation, the one-year outlook tumbled from levels not seen since 1981.

The one-year estimate slid to 5.1%, a 1.5 percentage point drop, while the five-year view edged lower to 4.1%, a 0.1 percentage point decrease.

“Consumers’ fears about the potential impact of tariffs on future inflation have softened somewhat in June,” Hsu said. “Still, inflation expectations remain above readings seen throughout the second half of 2024, reflecting widespread beliefs that trade policy may still contribute to an increase in inflation in the year ahead.”

The Michigan survey, which will be updated at the end of the month, had been an outlier on inflation fears, with other sentiment and market indicators showing the outlook was fairly contained despite the tariff tensions. Earlier this week, the Federal Reserve of New York reported that the one-year view had fallen to 3.2% in May, a 0.4 percentage point drop from the prior month.

At the same time, the Bureau of Labor Statistics this week reported that both producer and consumer prices increase just 0.1% on a monthly basis, pointing toward little upward pressure from the duties. Economists still largely expect the tariffs to show impact in the coming months.

The soft inflation numbers have led Trump and other White House officials to demand the Fed start lowering interest rates again. The central bank is slated to meet next week, with market expectations strongly pointing to no cuts until September.

Britain’s government is planning to ramp up public spending — but market watchers warn the proposals risk sending jitters through the bond market further inflating the country’s $143 billion-a-year interest payments.

U.K. Finance Minister Rachel Reeves on Wednesday announced the government would inject billions of pounds into defense, healthcare, infrastructure, and other areas of the economy, in the coming years. A day later, however, official data showed the U.K. economy shrank by a greater-than-expected 0.3% in April.

Funding public spending in the absence of a growing economy, leaves the government with two options: raise money through taxation, or take on more debt.

One way it can borrow is to issue bonds, known as gilts in the U.K., into the public market. By purchasing gilts, investors are essentially lending money to the government, with the yield on the bond representing the return the investor can expect to receive.

Gilt yields and prices move in opposite directions — so rising prices move yields lower, and vice versa. This year, gilt yields have seen volatile moves, with investors sensitive to geopolitical and macroeconomic instability.

The U.K. government’s long-term borrowing costs spiked to multi-decade highs in January, and the yield on 20- and 30-year gilts continues to hover firmly above 5%.

Official estimates show the government is expected to spend more than £105 billion ($142.9 billion) paying interest on its national debt in the 2025 fiscal year — £9.4 billion higher than at the the time of the Autumn budget last year — and £111 billion in annual interest in 2026.

The government did not say on Wednesday how its newly unveiled spending hikes will be funded, and did not respond to CNBC’s request for comment about where the money will come from. However, in her Autumn Budget last year, Reeves outlined plans to hike both taxes and borrowing. Following the budget, the finance minister pledged not to raise taxes again during the current Labour government’s term in office, saying that the government “won’t have to do a budget like this ever again.”

Andrew Goodwin, chief U.K. economist at Oxford Economics, said Britain’s government may be forced to go even further with its spending plans, with NATO poised to hike its defense spending target for member states to 5% of GDP, and once a U-turn on winter fuel payments for the elderly and other possible welfare reforms are factored in.

Additionally, Goodwin said, the U.K.’s Office for Budget Responsibility is likely to make “unfavorable revisions” to its economic forecasts in July, which would lead to lower tax receipts and higher borrowing.

“If recent movements in financial market pricing hold, debt servicing costs will be around £2.5bn ($3.4 billion) higher than they were at the time of the Spring Statement,” Goodwin warned in a note on Wednesday.