Consumer sentiment fell by nearly 10 percent this month as inflation continues wreaking havoc on short- and long-term economic expectations, according to the University of Michigan’s monthly Surveys of Consumers.
The declines were broad-based, according to the report, and covered political affiliation, income, age, and other factors. Consumers’ assessment of their current financial situation on a year-over-year basis was at its lowest reading since 2013, according to the report. Thirty-six percent of consumers attributed this to inflation. Rising prices plunged buying conditions for durables to its lowest reading since the question began appearing on the monthly surveys 44 years ago.
Lower consumer readings come as the threat of a recession looms. Economist Elliot Eisenberg said earlier this month during the Bank Holding Company Association Spring Seminar that the U.S. will likely enter a recession, which will last for less than one year. As reported by Reuters, former Goldman Sachs CEO Lloyd Blankfein said on May 15 that he believes the economy could enter a recession.
Year-over-year inflation was measured at 8.3 percent in April, a slight drop from the 8.5-percent spike in March. The Federal Reserve continues raising interest rates to combat high inflation. Earlier this month, the FOMC raised the target range for the federal funds rate to 0.75 to 1 percent. More hikes are expected at upcoming meetings.
Surveys of Consumers Director Joanne Hsu noted that the median expected year-ahead inflation rate is 5.4 percent. The mean reading is 7.4 percent, “reflecting substantial variation in price changes across types of goods and services, and in household spending patterns,” she said. Long-term median inflation expectations remain lower at 3 percent.