UM Case Study: Consumer Attitudes at a Standstill Amid Economic Uncertainty | So Good News
Consumer sentiment was unchanged in October, rising just 1.3 points over September, according to the new Consumer Sentiment Index from the University of Michigan in Ann Arbor.
The UM Consumer Sentiment Index rose to 59.9 in the October 2022 survey, up from 58.6 in September and down from last October’s 71.7.
The Current Index, meanwhile, was up to 65.6, from 59.7 in September and below last October’s 77.7. The Expectations Index fell to 56.2, down from 58 in September and below last October’s 67.9.
Following a notable reversal in August, sentiment remained at historic lows as consumers continued to voice concerns about inflation. Purchases of durable goods rose 23 percent on the back of price cuts and supply constraints. However, business expectations for the coming year fell by 19 percent, indicating that consumers believe the economy will get worse before it gets better.
Joanne Hsu, economist and director of the survey, said: “Overall sentiment remains at historically low levels and is still linked to an impending recession. “The growing sentiment among high-income consumers is worrisome because of their increased spending, and their negative sentiment is unlikely to diminish as a result of the ongoing economic downturn.”
The fact that attitudes are little changed hides trends and incomes that diverged in unusual ways in October, according to the university. In general, consumers with higher incomes show higher attitudes than consumers with lower incomes. The current data show, however, that for high-income consumers, attitudes have continued to decline in recent months and are now worse than their low-income counterparts.
The recent turmoil in the financial markets weighed on high-income consumers, with 17 percent citing the recession as affecting their finances, the highest percentage in five months. Their expectations for their earnings and their finances in general for the coming year were significantly skewed this month.
High-income consumers also pointed to worsening business conditions, both short-term and short-term, as well as labor markets. With the stock market falling and inflation rising at the same time, high-income consumers seem more concerned about the recession.
Despite the recent rise in gas prices, sentiment among low-income consumers reached its best reading in 10 months. This improvement was largely driven by current income and reflects strength in the labor market, particularly in low-wage sectors. Compared to September, low-income consumers reported better expectations for their future income and spending in the coming year.
Consumers’ outlook for short-term and long-term financial conditions improved significantly last month. Many have noticed that food-related problems seem to be decreasing. Given their vulnerability to economic downturns, however, their economic dependence can change quickly.
To see the full results of this survey, go here.