US consumer sentiment drops on inflation fears

Complaints about rising prices reach an all-time record

US consumer sentiment fell sharply and unexpectedly in early July to the lowest level in five months as inflation worries dented confidence in the economic recovery, a survey showed yesterday.

The University of Michigan said its preliminary consumer sentiment index fell to 80.8 in the first half of this month — the lowest since February — from a final reading of 85.5 in June.

“Consumers’ complaints about rising prices on homes, vehicles, and household durables has reached an all-time record,” Richard Curtin, the survey director, said.

Lowest expectations

The survey’s gauge of current economic conditions also fell to a reading of 84.5, the lowest since

August 2020, from 88.6 in June. Its measure of consumer expectations slid to 78.4, the lowest since February, from 83.5. The survey’s one-year inflation expectation shot to the highest level since August 2008 at 4.8 per cent, up from 4.2 per cent, while its five-year inflation outlook ticked up to 2.9 per cent from 2.8 per cent in June.

“Inflation has put added pressure on living standards, especially on lower and middle income households, and caused postponement of large discretionary purchases, especially among upper income households,” Richard Curtin, director of the survey.

“Consumers’ complaints about rising prices on homes, vehicles, and household durables” reached an all-time record, Curtin said. The university’s measure of buying plans for durables fell to 101 in early July, the lowest since April 2020 during the height of the pandemic.

Buying attitudes for vehicles and homes shrank to their lowest point since 1982, the report showed. Just 30 per cent of all consumers cited favourable home buying conditions, the lowest level since September 1982.

Concerns

The gauge of current conditions dropped to 84.5 in July, the lowest since August, from 88.6. The university’s measure of expectations decreased to a five-month low of 78.4 from 83.5.

Despite concerns about higher prices, leisure-related spending is likely to rise as more Americans resume travel during the crucial summer season.