Americans’ views of their country’s economy deteriorated to their lowest level in months as rising prices and inflation remained at the “front line” of consumer concerns, according to a widely followed survey released Friday by the University of Michigan.
Key data
Consumer confidence, a monthly reading of Americans’ views on the economy, fell from a preliminary reading of 55.1 to 53.6 in October, below the historical benchmark of 100 and the lowest reading since May (52.2), according to a reading from the University of Michigan survey.
The downwardly revised sentiment reading fell below Wall Street’s expectation of 55, according to FactSet.
Americans’ views on current economic conditions fell to their lowest level since August 2022 (58.6), falling from 60.4 in September to 58.6 in October, according to the survey.
Americans expect prices to rise 3.9% over the next five to 10 years, up from the 3.7% forecast in September, and for prices to rise 4.6% over the next year, up from 4.7% last month.
The Bureau of Labor Statistics reported Friday that prices rose 3% last month from September 2024, below economists’ estimates of 3.1%, as gasoline prices rose 4.1%, the largest monthly increase among all items tracked by the agency.
Why are Americans pessimistic about the economy?
The decline in economic optimism in recent months is largely due to consumers remaining “frustrated by the persistence of high prices,” according to the survey, which indicated that about half of respondents said their personal finances had worsened as a result. Joanne Hsu, director of the survey, stated that consumers “perceive little substantial change” in the economic situation between September and October, although “inflation and high prices remain a primary concern,” and there is “little evidence” that the continued federal government shutdown has deteriorated the economic outlook. In his preliminary reading of the consumer confidence survey data, Hsu also cited weakening job prospects as a cause for concern among Americans.
What to pay attention to
The Federal Reserve will conclude its next policy meeting on October 29, and investors anticipate that the central bank will cut interest rates again by a quarter of a percentage point, putting them between 3.75% and 4%, according to CME’s FedWatch tool. During its September meeting, the Fed appeared to be divided on the number of rate cuts for December, although “about half” of policymakers expected at least two additional cuts by the end of the year, according to meeting minutes released earlier this month.
Key background
Economic confidence has steadily declined among Americans in recent months, as concern spread about rising prices after President Donald Trump imposed tariffs on U.S. trading partners. Americans have also expressed pessimism about the labor market, with 27% of consumers saying there is “abundance of jobs,” according to a survey by the Conference Board think tank, the lowest reading since February 2021. It is unclear whether the labor market deteriorated again in September, after unemployment rose to 4.3% in August with just 22,000 nonfarm jobs added, as the Bureau of Labor Statistics has postponed the release of employment data during the government shutdown. However, reports from economists and investment firms suggest that the labor market has worsened. Carlyle Group estimated that U.S. employers added 17,000 jobs last month, and ADP reported that private sector payrolls fell by 32,000 in September, the largest decline since March 2023.
This article was originally published by Forbes US.
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