Chart of the day: Consumer sentiment drops to record low
REAL ECONOMY BLOG | June 10, 2022
Authored by RSM US LLP
Consumer sentiment plunged in June as energy and gasoline prices spiked. The headline consumer sentiment index from the University of Michigan dropped to 50.2, the lowest on record.
Consumers became more concerned about inflation as both short- and long-term inflation expectations rose, according to a monthly survey released by the University of Michigan reported on Friday.
With inflation’s peak remaining elusive, we expect consumer sentiment to stay underwater for several months.
Higher inflation expectations are particularly concerning for the Federal Reserve, which has made clear that keeping inflation expectations well-anchored is its top priority. Together with the upside surprise from the inflation report on Friday, any talk about a September pause in rate hikes should be tempered.
Views on the current conditions of the economy and future expectations also decreased significantly on the month.
The decline was expected as the index is well-known for its correlation with gasoline prices. The gas price subindex within the report shows a sharp increase from 24.3 in April to 39.5 in May. This mirrors the recent increase in oil and gasoline prices.
What is more concerning is the uptick in inflation expectations. The 12-month inflation expectation inched up to 5.4% from 5.3% previously, while the five- to 10-year expectation increased to 3.3% from 3.0% a month ago—the highest since 2008, when oil and gasoline prices reached an all-time high.
Elevated inflation and rising interest rates slow down consumers’ buying intentions for homes, vehicles and major household items.
The subindex that asks consumers if it is a good time to buy a house dropped for the fourth month in a row on a three-month moving average as mortgage rates increased and housing prices continued to climb. This implies a further drop in housing sales in May and June.
Call us at +1 213.873.1700, email us at email@example.com 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 2022-06-10.
2022 RSM US LLP. All rights reserved.
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.
Vasquez & 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 Vasquez & Company LLP can assist you, please call +1 213.873.1700.
Subscribe to receive important updates from our Insights and Resources.