The stock market is booming, pandemic restrictions are easing, jobs are plentiful, and employers are giving raises galore—yet U.S. consumers are feeling more downbeat about the economy and finances than they have in a decade, new data from a widely watched poll shows. Apparently inflation is overshadowing all the good news.
The University of Michigan’s Index of Consumer Sentiment fell again in early November and is now at its lowest point since November 2011, data released Friday showed. Each month the index measures consumers’ feelings about their own finances and the broader economy—both current and future prospects—using a minimum of 500 phone interviews statistically designed to be representative of all American households. As the chart below shows, they weren’t this gloomy even during the depths of the pandemic.
The U.S. inflation rate jumped to 6.2% in October, the highest in 31 years. While many respondents in the latest University of Michigan poll reported income gains, half of all families interviewed didn’t think they would come out ahead once soaring inflation was taken into account. One in four consumers cited inflation-related declines in their living standards in November, and the problem was particularly acute among older people and those with lower incomes.
“Inflation has clearly gripped the public imagination in a way not seen in decades,” said Douglas Porter, chief economist at BMO Capital Markets, in a commentary.
Changes in people’s attitudes about their financial situation affect their spending behavior and, in turn, can signal changes in the direction of the economy. That’s why policymakers use indexes including the University of Michigan’s as a barometer of economic activity.
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