Skip to content
Rising prices plunge consumer sentiment to decade low

The Biden administration’s failure to tackle high and rising inflation pushed consumer confidence this month to its lowest level in a decade.

The University of Michigan’s final sentiment index fell to 67.4 in the month from 71.7 in October, data showed Wednesday. This is a slight improvement from the mid-month reading and above consensus forecast.

“Consumers expressed less optimism in the November 2021 survey than at any time in the past decade regarding the outlook for their own finances as well as the economy in general,” said Richard Curtin, Chief Economist of the Consumer Survey. “The decline was due to a combination of rapid inflation combined with the absence of federal policies that would effectively repair the inflationary damage done to household budgets.”

Both indicators of current conditions and expectations for the future have fallen sharply.

While inflation in the spring and early summer was initially focused on only a few commodities with severe supply chain shortages, it is not widespread in the economy and consumer pain is widespread. . One in four consumers said inflation had eroded their standard of living, according to Curtin.

“Rather than gradually abating as shortages diminish, complaints about declining living standards have doubled in the past six months and quintupled in the past year. Consumers expected lower inflation-adjusted incomes and spending cuts due to rising inflation to slow the rate of growth of the domestic economy over the coming year ” , Curtin said.

It might not weigh on vacation spending. Curtin said consumers are eager to return to normal, prepandemic vacation get-togethers with friends and family. In addition, they plan to spend the accumulated savings on gifts and celebrations despite the higher prices.

Curtin warns that time is running out to contain inflation.

The real transitory problem is the rapid closing of the window where effective policy actions can be accomplished through very modest nudges to interest rates and regulations. Currently, consumers still expect inflation to return to a much lower level over the next five years, but that anchor has started to give way: long-term inflation expectations. rose 0.5 percentage points last year, reaching 3.0% in November. If long-term expected inflation continues to accelerate in the first half of 2022, it will make it more difficult to control, and even more so if the rise continues in the second half of 2022. In addition, a prolonged inflationary period will lead to a recovery. urgently to extend government job loss relief payments to cover inflationary declines in living standards. There will be no more compelling precedent for consumers than the 5.9% inflationary adjustment in social security payments which begins in January 2022.

On Tuesday, President Joe Biden announced plans to fight inflation by releasing 50 million barrels of oil from strategic reserves and investigating oil companies for anti-competitive allegations. The price of oil rose 3.3%.

Not all news on the site expresses the point of view of the site, but we transmit this news automatically and translate it through programmatic technology on the site and not from a human editor.