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The University of Michigan’s US Consumer Sentiment Index witnessed a decline for the fourth consecutive month. Hitting 60.4 in November—the lowest since May. This downward trend raises concerns about the economic outlook. As households’ expectations for inflation reached the highest point in over a dozen years.
Inflation Concerns Deepen US Consumer Sentiment
Households’ expectations for inflation in the year ahead rose to a seven-month high of 4.4%, marking a growing unease among consumers. The medium-term outlook for price pressures soared to 3.2%, the highest since March 2011.
The sustained decline in consumer sentiment poses challenges for policymakers. Who strive to strike a balance between controlling inflation and fostering economic optimism. Thus, as households grapple with rising inflation expectations, the FED faces the delicate task of guiding the nation toward economic stability.
Current Conditions and Future Expectations
The survey’s preliminary gauge of current conditions fell to 65.7, while the expectations index slid to 56.9. Both indices, the lowest since May, reflect a somber view among consumers regarding the present economic situation and future prospects.
Read More: UK GDP Monthly Estimate for September 2023: 0.2% Growth
Federal Reserve’s Watchful Eye
Federal Reserve officials, have raised interest rates by 5.25 percentage points since March 2022. However, closely monitor consumer attitudes on price trends. The aim is to ensure that inflation expectations trend lower, preventing any shifts in consumption behavior that could reverse progress in curbing the pace of price increases.
Persistent Inflation Impact Of US Consumer Sentiment
Persistently high inflation has contributed to a negative perception of the US economy among households. Despite record-high employment, historically low jobless rates, rising wages, and robust economic growth, the lasting effects of the pandemic since 2020 continue to shape consumer sentiment negatively.
As the Federal Reserve navigates economic challenges, understanding and addressing consumer sentiment and inflation expectations remain crucial in shaping the trajectory of the US economy.
