Consumer Confidence in the Economy Reaches Lowest Level Since November

Consumer sentiment plummeted to its lowest level in six months due to reaccelerated price increases, according to the latest University of Michigan survey released on Friday. The survey found that consumers are expecting even higher price increases in the coming year compared to readings from previous months. The gauge, closely monitored by the Biden administration, dropped 13% from April’s 77.2% reading to 67.4%. Economists had forecasted that consumer expectations would only fall to 76.9%. However, while the current reading is an improvement from last May’s 4% inflation rate, it is now at 3.5%.

While inflation may be lower than it was a year ago, recent trends have been in the wrong direction, making a rate cut from the Federal Reserve less likely for the time being. The report indicated that year-ahead inflation expectations increased to 3.5% from 3.2% in April, moving further away from the central bank’s target of 2%. Additionally, long-run inflation expectations rose from 3.0% in April to 3.1%.

Businesses factor in inflation expectations when determining pricing for goods and services, as these expectations can impact the pace of price hikes. The survey suggests that recent consumer optimism about the economy is diminishing, with concerns extending beyond inflation to include worries about rising unemployment rates. Joanne Hsu, the university’s director of Surveys of Consumers, highlighted these concerns in a statement.

This is a developing story and will be updated as new information becomes available.