US consumer sentiment drops again in November, inflation expectations
rise
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[November 11, 2023] By
Dan Burns
(Reuters) -U.S. consumer sentiment fell for a fourth straight month in
November and households' expectations for inflation rose again, with
their medium-term outlook for price pressures shooting to the highest
level in more than a dozen years, a survey showed on Friday.
The University of Michigan's preliminary reading of its Consumer
Sentiment Index dropped to 60.4, the lowest level since May, from
October's final reading of 63.8.
The median expectation among economists in a Reuters poll had been for
the index to be little changed at 63.7.
The survey's preliminary gauge of current conditions fell to 65.7 from
last month's final level of 70.6, while the expectations index slid to
56.9 from 59.3 in October. Like the headline index, both sub-indexes
were the lowest since May.
"While current and expected personal finances both improved modestly
this month, the long-run economic outlook slid 12%, in part due to
growing concerns about the negative effects of high interest rates,"
Joanne Hsu, the director of the University of Michigan's Surveys of
Consumers, said in a statement. "Ongoing wars in Gaza and Ukraine
weighed on many consumers as well."
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Consumers' outlook for inflation in the year ahead rose for a second
month to a seven-month high of 4.4%, "indicating that the large increase
between September's 3.2% reading and October's 4.2% reading was no
fluke," Hsu said.
Meanwhile, over a five-year horizon, consumers expect inflation to
average 3.2%, up from 3.0% in October and the highest since March 2011.
Officials at the Federal Reserve, which has raised interest rates by
5.25 percentage points since March 2022 to lower inflation from
four-decade highs, pay close attention to consumers' attitudes about
price trends. They are keen to see inflation expectations trend lower so
as not to alter consumption behavior that could reverse the gains they
have made in slowing the pace of price increases.
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![](../images/111123PIX/busine59.jpg)
A cashier charges products at a supermarket ahead of the
Thanksgiving holiday in Chicago, Illinois, U.S. November 22, 2022.
REUTERS/Jim Vondruska
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Thanks largely to persistent inflation, U.S. households have held a
broadly sour view of the U.S. economy and their own prospects ever
since the coronavirus pandemic struck in early 2020, even though
overall employment is back to record highs, jobless rates are near
historic lows, wages have been rising faster than before the health
crisis, and overall economic growth has been running well above
trend.
Gasoline prices are particularly influential in consumers' views on
inflation, and the University of Michigan's November survey said gas
price expectations over both the near and long run rose to their
highest levels of the year. That is notably at odds with recent
trends in prices at the pump, which have fallen 12% from their highs
of the year set in September and are now at their lowest since
March, according to the U.S. Energy Information Administration.
"The rise in consumer inflation expectations, despite falling gas
prices, will be concerning to the Fed," Grace Zwemmer, economic
research analyst at Oxford Economics, wrote. "The Fed will want to
see a decline as they try to bring inflation down to their target
rate of 2%, and elevated inflation expectations would be another
sign that rates will need to stay higher for longer."
(Reporting by Dan Burns; Editing by Chizu Nomiyama and Paul Simao)
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