Why Folks Are Suddenly Feeling Better About Inflation
Despite some rough months, a 58.6 consumer sentiment index score indicated people aren't as worried about inflation.
This article is more than 2 years old
It’s been a brutal year for the U.S economy, with gas prices and inflation hitting record-breaking highs. But despite the ongoing cost of living crisis, Americans feel more positive about the economy and believe inflation will settle down. However, that positive belief is still shrouded in uncertainty. According to data from the University of Michigan, the country’s consumer sentiment improved by less than initially estimated.
The University’s consumer sentiment index for September was downwardly revised to 58.6 from its initial estimate of 59.5. While economists had expected the index to remain unchanged, it’s still the highest reading since April. Speaking about the data, Surveys of Consumers Director Joanne Hsu said buying conditions for durables and the one-year inflation outlook continued lifting from the extremely low readings earlier in the summer.
But she told Nasdaq that these gains were largely offset by modest declines in the long-term outlook for business conditions. The report also indicated that while the current economic conditions index rose from August to September, the index of consumer expectations was unchanged at 58.0. These mixed views were shared by several CNN Business readers, who feel that inflation is improving. But they are still worried about how long it will last.
Many told the publication they continue to be burdened by high food prices, soaring housing costs, and other expenses. So despite the bounce back, sentiment levels are still comparable to those seen during the Great Recession. “The muted optimism about the economy is being felt by consumers across all income spectrums,” Hsu explained. This reflects the shared concerns over inflation, even among high-income folks who are known for spending the most.
Additionally, the survey data shows that short and long-term inflation expectations declined, with the median expected rate for the next 12 months falling to 4.7%. That’s the lowest reading since September 2021. Long-run inflation expectations also dropped to 2.7%, the lowest level since July 2021. Their lower expectations could translate to people reining in spending and asking for smaller wage increases, essentially aligning with the Federal Reserve’s mission to slow demand and lower inflation.
And given the data released by the Bureau of Economic Analysis, the Federal Reserve’s plan might work. The research indicates that high prices are persisting, with the Personal Consumption Expenditures price index for August showing that its core inflation measure, which excludes food and energy, rose by 4.9% when compared to the year before. The monthly reading also rose by 0.6% from July to August.
Despite the slight uptick in consumer sentiment surrounding inflation, most Americans still aren’t feeling great about the economy. Marcus Satterfield told CNN Business that he is happy to be paying around $60 to fill up his gas tank. But the $40 saving isn’t offsetting the increases he’s seeing at the supermarket and other retailers around his Virginia Beach, Virginia, home.
Other consumers echo Satterfield’s feelings and the sentiment is not unfounded. Hsu told Nasdaq that inflation expectations are likely to remain relatively unstable in the months ahead as consumer uncertainty over these expectations remained high. And it’s unlikely to wane in the face of continued global pressures on inflation.
