Resources
Consumer sentiment hits 5-month low amid elevated inflation expectations
REAL ECONOMY BLOG | October 13, 2023
Authored by RSM US LLP
Consumer sentiment this month dropped to the lowest since May, according to preliminary October data in the University of Michigan survey released Friday. The decline stems from the rebound in inflation, high gasoline prices and weakened expectations due to a looming government shutdown.
More concerning is the sharp increase in inflation expectations, which should add some pressure on the Federal Reserve ahead of its November meeting.
The sentiment index fell to 63 in October from 68.1 in September. Meanwhile, the 12-month inflation expectation rose to 3.8% from 3.2%, and the 5-to-10-year expectation rose to 3.0% from 2.8%, according to the University of Michigan survey.
Clearly, rising prices at the pumps and headline CPI (consumer price index) inflation staying at 3.7% for the last two months have had a significant impact on consumers’ inflation outlook.
This is definitely not good news for the Fed as it tries to engineer a soft landing, possibly without any more rate hikes this year.
Consumers are down on most sentiment subindexes, from finances to income and job prospects. However, when asked about spending plans, survey respondents did not indicate any change in buying intentions for major items. They are down slightly for buying a new car and even less so for buying a new house.
To be clear, consumer sentiment about household balance sheets remains solid when compared to the last five years and even the next five years. That is more in line with our new estimate of excess savings: There are about $400 billion left in the economy that should be able to fuel spending and growth at least until the first quarter of 2024.
But the outlook for consumer sentiment might face more risks going forward. Geopolitical conflict in the Middle East could cause periodic volatility in oil and energy markets with varied second-order effects on domestic gasoline prices. While the conflict’s impact on energy prices remains limited at the moment, it is critical to keep monitoring the spillover effect the longer the conflict lasts.
Let's Talk!
Call us at (325) 677-6251 or fill out the form below and we'll contact you to discuss your specific situation.
This article was written by Tuan Nguyen and originally appeared on 2023-10-13.
2022 RSM US LLP. All rights reserved.
https://realeconomy.rsmus.com/consumer-sentiment-hits-5-month-low-amid-elevated-inflation-expectations/
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Condley and Company, LLP is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.
For more information on how Condley and Company can assist you, please call (325) 677-6251.