Consumers haven’t felt this bad about the economy since November

Consumers haven’t felt this bad about the economy since November

Consumer sentiment plunged to a six-month low amid re-accelerated price increases, according to the University of Michigan’s latest survey of consumers, released Friday.

Additionally, consumers are bracing for higher price increases next year compared to the previous month’s reading, the survey found.

That gauge, closely tracked by the Biden administration, plunged 13% from April’s 77.2% reading, to 67.4%. Economists polled by FactSet expected consumer expectations to fall to just 76.9%. However, the latest reading is still better than last May, when inflation was running at 4%, compared to the latest reading of 3.5%.

Although inflation is lower than a year ago, it has moved in the wrong direction recently, moving expectations for a rate cut from the Federal Reserve to the back burner.

Perhaps the scariest report for the Fed is that inflation expectations next year rose to 3.5% from 3.2% in April, well below the central bank’s 2% target. Long-term inflation expectations also rose, to 3.1% from 3.0% in April.

Since inflation expectations can effectively control the rate of price increases, businesses take those expectations into account when setting prices for goods and services.

The survey showed that consumer confidence recently about the state of the economy is on the wane. Beyond inflation, they are also worried about higher unemployment rates, Joanne Hsu, director of the university’s Consumer Survey, said in a statement.