Consumer sentiment in the U.S. has been on a downward trend for three consecutive months, with Americans expressing concerns about their own finances and ongoing inflation. The preliminary version of the University of Michigan’s consumer sentiment index was released on Friday, showing a drop to 65.6 this month from the final reading of 69.1 in May. Despite June’s reading being about 30% higher than the low reached in June 2022 during the peak of inflation, it still remains below levels associated with a healthy economy.
Ever since the pandemic began and inflation spiked in 2021, consumers have had a generally pessimistic outlook. This negative sentiment towards the economy is affecting President Joe Biden’s reelection chances as consumer spending is crucial for economic growth.
Despite consumer anxiety over inflation, recent data shows a substantial cooling of inflation in May, with costs for gasoline, new cars, and car insurance actually decreasing. Consumer spending is closely monitored by the Federal Reserve and economists since it is a significant driver of economic activity in the U.S.
While spending slowed in April after adjusting for inflation, Americans are still willing to spend on travel, restaurants, and live events, supporting the economy that has slowed in the first quarter.
In summary, while consumer sentiment has been on a downward trend for three consecutive months due to concerns about their own finances and ongoing inflation, recent data shows that there has been some cooling of inflation in May with costs for certain items decreasing. Consumer spending continues to be closely monitored by the Federal Reserve and economists as it is a significant driver of economic activity in the U.S., and despite some slowing down of spending Americans are still willing to spend on certain activities like travel and live events supporting the economy that has slowed in the first quarter.
