Consumer sentiment slightly increased this month but remained far lower than last year, according to September’s University of Michigan Surveys of Consumers.
The Index of Consumer Sentiment increased by 1.3 points to 59.5, far lower than the 72.8 reading in September 2021. The increase was far less pronounced than August, when consumer sentiment jumped 13 percent — from 51 to 58. The index for consumer expectations increased by nearly two points this month but remains eight points lower than 12 months ago. The index for current economic conditions increased by three-tenths of a point to 58.9. The index’s personal finance component along with buying conditions for durables both remained at relatively low levels from August.
Though the one-year economic outlook has improved from earlier this summer, Surveys of Consumers Director Joanne Hsu said that growth has been offset by decreases in the long-run outlook.
As energy prices continue to decline, the median expected year-ahead inflation rate fell to 4.6 percent, the lowest reading since September 2021, according to the report. Median long-term inflation expectations dropped to 2.8 percent, below the 2.9 percent to 3.1 percent range for the first time since July 2021. However, uncertainty over short-term inflation reached its highest level in 40 years, and uncertainty over long-term inflation increased from 3.9 percent to 4.5 percent.
“It is unclear if these improvements will persist, as consumers continued to exhibit substantial uncertainty over the future trajectory of prices,” Hsu said.
Even though consumer sentiment remains stunted, a Federal Reserve Bank of St. Louis study in recent weeks found that U.S. real GDP growth would return to positive levels following drops in the first and second quarters of this year. Though current inflation is far higher than the Fed’s current 2 percent target, the report found that inflation would continue to decelerate.