American Consumers’ Views on Economy Plunges, According to New Survey | So Good News
American consumer sentiment fell this month, although figures were revised up in a just-released survey.
Consumer sentiment for November was lower than expected, and was revised to 56.8 from the initial reading of 54.7 percent, according to the University of Michigan on Nov. 24.
The result was better than most economists expected with the continued revision, but still below the October reading of 59.9, although a positive number.
“Consumer sentiment fell 5% to a record low in October, erasing a third of the gains since June’s decline,” said the survey’s director, Joanne Hsu.
“Along with the ongoing challenges of rising prices, consumer sentiment has also been weighed down by rising borrowing costs, declining real estate prices, and weakening prospects for the labor market,” he said.
There was an average 6 percent decline between October and November in the current fiscal year and a slight decline in annual inflation expectations.
Current economic conditions fell to 58.8 in November from 65.6 in October, while the index of consumer expectations fell to 55.6 from 56.2.
The index, which measures consumers’ views on their finances and the current state of the economy, was up from a year earlier at 73.6.
“Doubts on these expectations remained at a high level, indicating that stabilization of these expectations is unlikely,” Hsu said.
Buyer Sentiments Decline Due to High Rents, High Prices
About 60 percent of consumers have already cut their spending due to inflation and many plan to cut spending in the next 12 months, according to a University of Michigan survey.
Most of those surveyed said they are reluctant to borrow money to make major purchases, reflecting a sharp decline in cash flow, as consumers begin to use their savings to pay bills.
About 8 percent of households say they will not buy things with a big price increase in the next year, while another 51 percent of households said they are reducing their overall spending.
“Along with the increased risk of inflation, consumer sentiment has also been weighed down by rising borrowing costs, declining real estate prices, and weakening job market expectations,” according to Hsu.
Consumer sentiment picked up early in the fourth quarter, as oil prices eased from record highs but commodity prices began to rise.
Rising inflation and rising mortgage rates have slowed the economy, making many households more cautious about their future finances.
Rising Money, Rising Interest Rates Tilt the Economy to a Deep Recession
Meanwhile, America’s forward-looking inflation rate fell to 4.9 percent in November from 5.0 percent last month.
Five-year inflation expectations rose slightly to 3 percent this month from 2.9 percent in October.
The Federal Reserve has been closely monitoring inflation expectations as a key predictor of future inflation.
However, the likelihood of a major recession is increasing, as the Fed continues its policy of increasing monetary policy to curb inflation.
Based on data from the Consumer Price Index from October, the latest annual inflation rate is at 7.7 percent, which the central bank expects to reduce to 2 percent by the end of 2023.
This week, a report by the Commerce Department found that fixed orders, such as equipment and vehicles, fell this month after gaining in October, falling 19 percent from September’s level due to high interest rates and higher costs.