Consumer Sentiment Falls to Lowest Level Since May: University of Michigan Report
According to the latest report from the University of Michigan, consumer sentiment in the United States fell to its lowest level since May. The preliminary October reading of the university’s gauge of consumer sentiment dropped to 63, down from 68.1 in the prior month.
This decline in consumer sentiment comes as a surprise, as economists polled by the Wall Street Journal had expected a reading of 67.4 for October. The report also included a measure of inflation expectations, which showed a notable increase. Americans’ expectations for overall inflation over the next year jumped to 3.8% in October, up from 3.2% in the previous month, marking the highest level since April. Expectations for inflation over the next 5 years also rose to 3% from 2.8% in September.
The Federal Reserve economists believe that if consumers anticipate high inflation, it becomes easier for firms to raise prices, leading to higher price pressures. This increase in inflation expectations could have significant implications for the economy and monetary policy moving forward.
The report also highlighted a decline in consumers’ views on current conditions, which tumbled to 66.7 in October from 71.4 in the prior month. Similarly, consumers’ expectations for the future also fell, dropping to 60.7 from 66.
Joanne Hsu, the director of UMich consumer surveys, stated that this decline in consumer sentiment was largely driven by concerns over inflation. Assessments of personal finances dropped by about 15%, while one-year expected business conditions fell by about 19%.
Following the release of the data, stock markets, including the DJIA and SPX, initially dropped from their opening highs. In addition, the 10-year Treasury yield, BX:TMUBMUSD10Y, was down 8 basis points to 4.63%.
Overall, this report indicates a notable decline in consumer sentiment and a significant increase in inflation expectations. These trends are likely to impact consumer spending and shape the economic outlook in the coming months. Policymakers will closely monitor these developments as they make decisions concerning monetary policy and economic stimulus measures.