US consumer sentiment declined in September. This reflects households’ concerns over inflation that persists and the softer outlook for the labour market.
The final Consumer Sentiment Index of the University of Michigan fell from 58.2 to 55.1 in August. This represents a monthly drop of 5.3% and a decline of 21.6% compared with one year ago.
This index is lower than the initial consumer sentiment index, which was released in early May.
The Current Conditions Index fell to 60.4 from 61.7 points in August. This indicates that the near-term financial situation of households has not improved much.
The Expectations Index fell to 51.7, down from 55.9 one month ago. This indicates growing concern about the future of economic conditions.
Joanne Hsu of Surveys of Consumers said that the decline was widespread across all age groups, income levels, and educational backgrounds.
In the survey, frustration over high prices was still a major theme. 44% of respondents said that inflation had eroded their finances. This is the highest number in an entire year.
She said that, “while September’s drop was modest, the trend was evident across all age groups, education levels, incomes, and other factors, as well as across five components of the index.”
She said that the sentiment of consumers who have larger stocks or those who do not hold any stock decreased in September.
She said that interviews this month show how consumers are feeling pressured by both the possibility of rising inflation and the weakening of the labour market.
Despite the Fed rate cut, inflation pressures continue to persist
Inflation readings showed that the Federal Reserve had not made much progress towards its 2% inflation target.
Commerce Department announced Friday that core price index for personal consumption expenditures, which is the Fed’s preferred measure of inflation, increased 2.9% in august compared to a year ago, and was unchanged from July.
Core prices increased by 0.2% on a monthly base.
In August, the PCE Index, which also includes energy and food, increased by 0.3%, bringing its annual rate to 2.7%, up from 2.6%.
The data was largely predicted by economists, but they stressed the difficulty for policymakers in balancing signs of slowing employment growth with sticky inflation.
The Fed cut the benchmark rate last week for the first year. It lowered the federal funds rates by 25 basis point to range between 4.00 and 4.25 percent.
Jerome Powell, the Chair of the Committee on Economic Policy and Development (CEC), described this policy environment as “challenging,” characterized by upside risks for inflation with growing risks at the other end.
Mixed signals from the markets
The financial markets responded cautiously to the inflation figures released on Friday.
Stock futures were slightly higher but gains were limited by the solid data on labour markets released just a day before and an upward revision of second quarter GDP growth from 3.7 percent to 3.8 per cent.
Investors worry that fewer jobless claims and stronger-than-expected growth could give the Fed less room to continue cutting rates.
Two-thirds or more of the US economy is driven by consumer spending.
The divergence in economic prospects between households with high incomes and those who are burdened by rising prices will likely shape the outlook for the economy as we approach the end of the year.
The post US consumer confidence drops in September but wealthy households remain steady could be updated as new information unfolds.
This site is for entertainment only. Click here to read more
