As a sign of how negative this sentiment has gotten, the University of Michigan’s Consumer Sentiment Index plummeted in November to 50.3. This decrease was significantly below the market consensus of 53.2. This decline is indicative of a deepening dampening of consumer interest from within the United States. The index jumped in October to a decidedly more upbeat 53.6. While consumer sentiment remains strong, this dramatic shift reflects ongoing changes in the economic landscape.
Both parts of the index, the Current Conditions Index and the Expectations Index, saw drops this month. Our Current Conditions Index has fallen to 52.3, down from 58.6. This recent drop reflects rising consumer discontent about the state of their finances. In like manner, the Expectations Index pulled back to 49.0, down from 50.3, reflecting an increasing negative outlook on future economic conditions.
Inflation expectations offer more detail into the direction of consumer sentiment. The 1-year Consumer Inflation Expectation increased to 4.7%, though just up from 4.6% in October. This increase is coming because consumers are starting to expect higher prices in the immediate future. The 5-year Consumer Inflation Expectation has fallen to 3.6%, from 3.9%. This decline reflects a modest easing of long-term inflation worries.
The Consumer Sentiment Index has dropped across the board. This decline is a sign that consumers are responding to a more challenging economic environment such as increasing inflationary costs and increasing market volatility. The USD Index gave this sentiment back, falling by -0.25% on the day to close at 99.45.
Analysts are concerned that the drop in consumer confidence will affect economic growth. After all, consumer spending accounts for nearly 70 percent of the U.S. economy. With both the present situation and the future outlook worsening, the business community is likely to have an increasingly difficult time making plan and investment decisions.