By Matthew Rusling, Xinhua News
26th June 2022 – (New York) U.S. consumer sentiment took a nosedive in early June, hitting the lowest level ever recorded amid surging inflation.
The University of Michigan’s consumer sentiment index on Friday saw the measurement drop 14.4 percent from May — the lowest level on record.
The drop occurred as Americans’ wallets are feeling the double-whammy of the highest gas prices in U.S. history and the worst inflation in 40 years.
“Today’s record low consumer confidence number … supports the view of those who believe that the U.S. economy is slowing and is at risk of recession,” Desmond Lachman, resident fellow at the American Enterprise Institute and a former official at the International Monetary Fund, told Xinhua.
“This should come as no surprise, considering how high inflation is eroding the purchasing power of wages,” Lachman said.
Sam Bullard, senior economist at Wells Fargo, a major U.S. bank, told Xinhua that inflation continues to be the dominant headwind for consumers.
“As we’re going into the summertime here, no doubt about it. And it was certainly reflected throughout the report,” Bullard said.
Forty-seven percent of consumers blamed inflation for eroding their living standards, just one point shy of the all-time high during the Great Recession of 2007-2009.
While over half of participants said they expected an income boost in the next year, 53 percent said they believe inflation will eat up any gains in income.
Consumers also expressed the highest level of uncertainty over long-run inflation since 1991, continuing a sharp increase that began in 2021, the survey found.
This comes as the most recent U.S. Labor Department consumer price index shows inflation unexpectedly skyrocketed 8.6 percent in May — the fastest clip in 40 years.
“The consumer sentiment index likely reflects both high gas prices and the endless drumbeat in the media about recession,” Dean Baker, senior economist at the Center for Economic and Policy Research, told Xinhua.
At a point where the unemployment rate is near a 50-year low, “most people believe we are in a recession,” Baker said.
“The reality is that people are not acting like these are bad economic times. Restaurant and hotel bookings are very strong, as is air travel. It looks like people are reporting back in this survey what the media are telling them about the economy,” Baker said.
Despite surging inflation, new home sales rose unexpectedly in May, according to Friday’s data from the U.S. Census Bureau. That was in spite of a jump in mortgage rates and plummeting consumer sentiment.
New homes sales spiked 10.7 percent in May, after economists had forecast a decline after sales plummeted 16 percent in April.
Brookings Institution Senior Fellow Barry Bosworth told Xinhua that the economic news was “quite mixed,” with declining consumer sentiment but stronger-than-expected new home sales.
Meanwhile, Friday’s national average price for a gallon of regular gasoline hovered around record highs, at 4.926 U.S. dollars per gallon, according to the American Automobile Association.