TL/DR –
A recent consumer sentiment report from the University of Michigan indicates that Americans continue to suffer from economic malaise, with sentiment remaining low following a 10% drop in April due to concerns over the labor market, interest rates, and inflation. The Consumer Sentiment Index was 65.6 in June 2024, a 31% rise from its low point in June 2022 when inflation hit a peak of 9.1%, but it has fallen 17% since the start of the year. While wages are growing faster than inflation and expected inflation for the next year is 3.3%, the same as a month ago, the consumer sentiment remains below the historic average, and below the pre-pandemic levels which only dipped below 90 once in the three years prior.
Consumer Sentiment Remains Unchanged amid Economic Concerns
The latest consumer sentiment report from the University of Michigan highlights ongoing economic concerns among Americans, with little shift since a 10% drop last month. Consumers continue to worry about the direction of the economy, according to the university’s chief economist, Joanne Hsu.
Fears about Labor Market, Interest Rates, and Inflation
Concerns included the potential softening of the labor market, uncertainty that interest rates would lower, and inflation not slowing down briskly enough. These fears, Hsu stated, persist into June.
University of Michigan’s Nationwide Survey
The nationwide survey, which has been tracking the country’s economic mood for many years, poses questions about business conditions, purchasing conditions, and personal finances.
Consumer Sentiment and Inflation
The consumer sentiment index was at its lowest in June 2022 with a reading of 50, coinciding with an inflation peak of 9.1%. However, the CPI is now only 3.3% higher than the previous year, and wages have grown faster than inflation. But with the CPI rising 17% over several years, Americans still have significant ground to cover.
Current Consumer Sentiment Index
The consumer sentiment index stood at 65.6 in June, based on preliminary results, a 31% increase from June 2022 but nearly the same as last year. It has also seen a 17% decline since the beginning of the year.
Future Inflation Expectations
Survey respondents anticipate a 3.3% price increase over the next year, mirroring last month’s expectations. However, Hsu noted that consumers are not expecting the extreme inflation experienced in 2022. Despite an improvement since then, the sentiment index is still below the historical average, signaling that the public’s mood still lacks optimism.
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