US consumer sentiment drops to 56.8 in Nov 2022: Report

The current-economic-conditions index dropped to 58.8 versus 65.6 in October. That is a 6.8-point or 10.4 per cent decrease for the month. This component is just five points above the June low of 53.8 and remains consistent with prior recessions, according to the results of the University of Michigan Surveys of Consumers.

Pessimistic consumer attitudes reflect a significant list of concerns, including inflation, rising interest rates, falling asset prices, and growing labour market pessimism. 

The second component—consumer expectations, one of the American Institute for Economic Research’s (AIER) leading indicators—fell 0.6 points, or 1.1 per cent for the month, to 55.6. This component index is 8.3 points above the July 2022 low of 47.3 and remains consistent with prior recession levels, Robert Hughes said in an article on the AIER website.

“Consumer sentiment fell 5 per cent below October, offsetting about one-third of the gains posted since the historic low in June,” added the report. “Along with the ongoing impact of inflation, consumer attitudes have also been weighed down by rising borrowing costs, declining asset values, and weakening labour market expectations. Buying conditions for durables, which had markedly improved last month, decreased most sharply in November, falling back 19 per cent to its September level on the basis of high interest rates and continued high prices.”

“Long-term business conditions declined a more modest 6 per cent, while short-term business conditions and personal finances were essentially unchanged,” the report further noted.

The one-year inflation expectations ticked down in November, falling to 4.9 per cent. The result remains below the back-to-back readings of 5.4 per cent in March and April but above the 4.7 per cent reading in September.

The five-year inflation expectations ticked up, coming in at 3.0 per cent in November. That result is well within the 25-year range of 2.2 per cent to 3.5 per cent. “Long run inflation expectations, currently at 3.0 per cent, have remained in the narrow (albeit elevated) 2.9-3.1 per cent range for 15 of the last 16 months,” stated the report. Furthermore, “Uncertainty over these expectations remained at an elevated level, indicating that the general stability of these expectations may not necessarily endure.”

Overall, economic risks remain elevated due to the impact of inflation, an aggressive Fed tightening cycle, and the continued fallout from the Russian invasion of Ukraine. The economic outlook remains highly uncertain.

Fibre2Fashion News Desk (NB)