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Consumer sentiment in the United States experienced a nosedive as more Americans became pessimistic in the face of stubborn inflation that has driven up costs for basic goods.
On Friday, the University of Michigan published its monthly index on U.S. consumer sentiment and it found that attitudes have only grown more negative. According to the results, the preliminary June sentiment index fell to 50.2 from 58.4 in May — the lowest reading on record.
At the same time, the index for consumer expectations moved lower from 55.2 to 46.8 and the sentiment for current economic conditions fell from 63.3 to 55.4 in the last month.
“Throughout the survey, consumers signaled strong concerns that inflation will continue to erode their incomes, and the factors they cited are unlikely to abate soon,” Joanne Hsu, director of the survey, said in a statement.
News of Americans’ sagging optimism in the state of the economy comes on the heels of Friday’s Consumer Price Index (CPI) report. According to the data compiled by the Department of Labor, inflation roared ahead again in May by 8.6% after an initial retreat in April.
Driving this resurgence was a sharp rise in energy prices, especially for gas, and higher food prices. The national average for a gallon of gasoline topped the $5 mark for the first time in the U.S.
This dour mood could portend to serious consequences if households opt to pare back spending. Consumption has remained relatively robust despite inflation, but a downturn could inch the U.S. economy only closer to what many fear is an oncoming recession.
Prominent business leaders and executives have expressed concern that it is a matter of when –not if — this will occur. Firms were battered by investors pulling back on stocks due to recession fears, sending the stock market into a prolonged period of volatility in May.
For the Federal Reserve, which monitors consumer sentiment closely, these reversals may signal that their past rate hikes in March and May have not been enough to curb inflation’s ascent. This may translate to more urgency for further rate hikes, something Fed Chairman Jerome Powell maintains the central bank is ready to do to restore price stability.
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