Inflation leads to a sharp drop in consumer confidence

Americans have become decidedly gloomy about their financial outlook, and inflation is the number one cause for anxiety, according to a ...

Americans have become decidedly gloomy about their financial outlook, and inflation is the number one cause for anxiety, according to a poll released Friday.

The University of Michigan has indicated that its consumer sentiment survey fell to its lowest level in a decade in early November. He attributed the decline to “the growing conviction of consumers that no effective policy has yet been developed to reduce the damage caused by soaring inflation.”

Hindered by supply chain disruptions and labor shortages in some industries, the economy has been strained by rising prices. The government announced this week highest inflation in 31 years, with a 6.2 percent price increase in October from the previous year.

In the Michigan survey, “the rise in prices of homes, vehicles and durable goods was reported more frequently than at any time in more than half a century.” But inflation is hardly limited to big purchases – foods like meat become more and more expensive, driving up the cost of preparing Thanksgiving meals.

Many policymakers speculated that higher inflation would be transient, due to the uneven reopening of the economy after widespread shutdowns due to the coronavirus pandemic.

Investors, too, have ignored the threat of inflation, even though it can erode the value of financial assets. Bond yields, which rise in times of inflation, remain low by historical standards. And the stock market is near record highs despite rising prices lately.

But the Michigan survey is a sign that consumers are starting to feel pinched. The survey reflected lower assessments of current conditions and economic outlook.

“Consumers are angry with inflation,” said Diane Swonk, chief economist at the accounting firm Grant Thornton in Chicago.

“Inflation will get worse before it gets better,” Ms. Swonk said. “It could moderate by the spring of 2022, and it affects the way people view the economy.”

But consumers in the United States continue to spend at high levels, she said, and the odds are good for a strong holiday shopping season.

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Newsrust - US Top News: Inflation leads to a sharp drop in consumer confidence
Inflation leads to a sharp drop in consumer confidence
Newsrust - US Top News
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