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Fears of rising inflation by Americans are weighing on consumer sentiment, and concerns about how the U.S. economy will recover from the pandemic are mounting.
The University of Michigan’s Consumer Sentiment Survey fell to 82.8 in May, down from 88.3 in April, as it weakened consumers ’attitudes about current and future conditions. According to a survey of economists by Reuters, it looks closely at expectations for the width to rise to 90.4.
The decline in sentiment is unpredictable: the rapid expansion of U.S. vaccines, the reopening of the economy, and the distribution of stimulus controls were expected to boost consumer confidence.
“Consumers are starting to feel a bit of inflation and are worried that the long decade of low inflation we have experienced is over,” said money market economist Thomas Simons Jefferies.
Respondents said the conditions for buying housing, cars and long-term home goods are the most negative, “since the end of the last inflationary period in 1980,” said Richard Curtin, chief economist in consumer surveys.
The data released earlier this week showed that consumer prices were advanced at a rate of 4.2 per cent in the 12 months of April, the largest increase since 2008. This rise has raised concerns that the U.S. economy is overheating as activity increases.
ING economist James Knightley said the break has been recent Colonial pipeline – a critical artery that sends liquid fuel from oil refineries to states on the east coast of the United States, which was closed for five days by a cyberattack – and then rising gasoline prices and buying panic you may even have “participated”.
The Federal Reserve has repeatedly warned that rising inflation will be temporary, even as rising prices pose a challenge for policymakers as they continue to boost the economy with massive fiscal and monetary stimulus.
A chain of Fed officials who are expected to speak to investors next week could be aware of the emergence of higher consumer price expectations. Politicians ’messages will also be crucial in the coming months.
The decline in consumer sentiment following a report from the Commerce Department showed that retail sales came to a sudden halt after a sharp rise in March last month as it eased stimulus controls and blockade restrictions.
Clothing, sporting goods, hobby and bookstore sales and online sales fell last month. Purchases of cars, car parts and electronics increased, and spending on bars and restaurants rose 3%, indicating a shift from goods to services.
However, some economists predict the strongest growth in consumer spending this year since 1946.
“It’s important that consumer spending will continue to rise despite still higher prices, due to the suspension of demand and the recording of savings balances,” Curtin said.
“This combination of sustained demand in the face of rising prices creates the potential for inflationary psychology, encouraging rational pre-purchase and rising cost of living wages,” he added.
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