Treasury

Consumer confidence is starting to erode

The UMich Index of Consumer Sentiment reached a six-month low.
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· less than 3 min read

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We hate to be the bearers of bad economic news, but, well… we’re gonna be the bearers of bad economic news.

The much-watched University of Michigan Index of Consumer Sentiment dropped sharply this month, falling 12.7% to 67.4 from last month’s score of 77.2. It’s the lowest the metric has been in the past six months. The results were consistent across a broad range of “age, income, and education groups,” Surveys of Consumers Director Joanne Hsu wrote.

Consumers of all political stripes saw the economy as worsening. Sentiment declined by around 10 points this month for Democrats, Republicans, and independents alike.

“While consumers had been reserving judgment for the past few months, they now perceive negative developments on a number of dimensions,” Hsu wrote. Those dimensions included their expectations for the economy and their personal finances, which plunged 12.5% this month, and their expectations for inflation in the year ahead, which rose slightly, from 3.2% to 3.5%.

“The magnitude of the slump in confidence is pretty big and it isn’t satisfactorily explained” by factors like geopolitical tensions or stock market changes, according to Paul Ashworth, chief North America economist at Capital Economics, CNBC reported. “That leaves us wondering if we’re missing something more worrying going on with the consumer.”

Recently, restaurant chains like McDonald’s and Starbucks have noted a decline in consumer spending, as the Associated Press observed.

But it’s also worth noting that consumer expectations are still 20.7% higher than they were last May, and consumer sentiment is 14.2% higher. It remains to be seen whether this month’s data is a blip on the radar or the beginning of a downward trend.

News built for finance pros

CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.