Inflation exploded, American consumer confidence collapsed!

Source: Wall Street News

Author: Liu Qian

U.S. consumer confidence at the University of Michigan hit a record low in June. Consumers’ short-term inflation expectations were the highest since 1981, and long-term inflation expectations rose above the narrow range of the past few months to the highest since 2008.

Data released on Friday showed that the preliminary value of the University of Michigan’s consumer confidence index in June was 50.2, a record low, significantly lower than the expected 58.2, and far below the final value of 58.4 in May. In terms of sub-indices, the initial value of the current situation index was 55.4, which was lower than the expected 62.9, and the final value in May was 63.3; the initial value of the expected index was 46.8, which was lower than the expected 55.3, and the final value in May was 55.2.

In terms of inflation expectations, which are closely watched by the market, the initial value of one-year inflation expectations in June was 5.4%, which was higher than the expected 5.3%, and the final value in May was 5.3%. The 5.4 percent figure is the highest since 1981. The initial five-year inflation forecast was 3.3%, the highest since 2008, above the narrow range of 2.9%-3.1% in the past few months and a final value of 3% in May. The rise in 5-year inflation expectations means that long-term inflation expectations have loosened.

Data released on the same day on Friday showed that the U.S. CPI broke again in May. The CPI in May rose by 8.6% year-on-year, a new high since December 1981, and higher than the 8.3% increase in April and the expected increase; the CPI in May increased by 1% month-on-month, significantly higher than the expected 0.7% and April’s 0.3%; The core CPI in May rose by 6% year-on-year, down from 6.2% in April, but still higher than the expected 5.9%; the core CPI in May increased by 0.6% month-on-month, the same as the increase in April, but higher than the expected 0.5% .

Joanne Hsu, director of the Michigan Consumer Confidence Survey, said in a statement:

Throughout the survey, consumers were strongly concerned that inflation would continue to eat into their incomes, and the factors they cited were unlikely to abate anytime soon. While consumer spending has remained strong so far, generally deteriorating sentiment could lead them to cut spending, slowing economic growth. A record 88% of consumers expect U.S. interest rates to rise next year.

Consumers’ assessments of their personal finances deteriorated by about 20%. 46% of consumers attribute their negative view to inflation, up from 38% in May; only one survey since 1981, when the economy was already in recession state. In general, gasoline prices are weighing heavily on consumers. Half of consumers spontaneously mentioned oil prices in interviews, up from 30% in May and just 13% a year ago. For the ninth month in a row, most consumers spontaneously mentioned supply shortages.

People’s assessment of buying conditions has fallen to an all-time low. All income groups are becoming increasingly pessimistic. Inflation has outstripped wage growth, causing many Americans to tap their savings and take on more debt. A more pronounced slowdown in consumer spending is a risk factor for the economy as higher prices reduce discretionary income, meaning less tipping for discretionary items.

Consumer confidence affects economic growth in the coming months. Pessimistic consumer sentiment will dampen spending levels and thus affect the economic recovery, while optimistic consumer sentiment will help the economy going forward.

Editor/Jeffrey

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