Consumer Sentiment Edges Up but Inflation Fears Send Buying Attitudes to 40-year Low University of Michigan's consumer sentiment index edged up to a reading of 71 in September, a slight uptick from August's 70.3, which was the lowest level since 2011.

By The Epoch Times

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

U.S. consumer sentiment ticked up slightly in September but remained mired at near decade lows, while worries about inflation drove buying attitudes for household durables to a low reached only once before—in 1980—according to a University of Michigan survey.

The university's consumer sentiment index edged up to a reading of 71 in September, a slight uptick from August's 70.3, which was the lowest level since 2011.

"The steep August falloff in consumer sentiment ended in early September, but the small gain still meant that consumers expected the least favorable economic prospects in more than a decade," Richard Curtin, the survey director, said in a statement.

The 13 percent slide from July to August was one the sharpest in percentage terms in the past 50 years, exceeded only by an 18.1 percent drop in 2008 and a 19.4 percent fall in April 2020, when pandemic-related concerns and business lockdowns sent unemployment surging and consumer confidence plummeting.

While the overall consumer confidence measure recorded a slight improvement in September, two gauges saw further declines. Buying attitudes for household durables fell to a low not seen in around 40 years, while long-term economic prospects fell to a decade low.

"The decline in assessments of buying conditions for homes, vehicles, and household durables left all three near all-time record lows," Curtin said, noting that the drops were "due to spontaneous references to high prices."

Inflation has emerged as a key concern amid the economic recovery, rising faster than wages and eroding the buying power of Americans. While Federal Reserve officials have maintained that inflation is temporary and that the pace of price hikes will taper off, they've acknowledged the risk that upward price pressures may be more persistent. The Fed's policy-setting body is set to meet this week to consider pulling back on some of the stimulus measures that have helped the economy recover but have also added to inflationary pressures.

Consumer inflation stood at 5.3 percent in the 12 months through August, 0.1 percentage point lower than the July and June figure, which was the highest 12-month spike since 2008, according to the most recent consumer price index report from the Labor Department. Still, the over-the-month pace of inflation ticked down to 0.3 percent in August from 0.5 percent in July and 0.9 percent in June, suggesting that peak inflation may have passed.

But a measure of business input costs, known as the producer price index (pdf), jumped by 8.3 percent over the year in August, the largest 12-month increase on record, reinforcing broader concerns about inflation as higher production costs tend to filter down to consumers.

Curtin assessed that a possible response to rising prices on the part of consumers who believe inflation is transitory is to pull back on purchases in the short term. Consumer spending is a key driver of the U.S. economy, accounting for around two-thirds of its gross domestic product.

"Postponing purchases is seen as a viable strategy. This implies a slowdown of spending in the months ahead and a more robust rebound later in 2022," he wrote.

If consumers believe inflation will be sticky, that could pressure wages, potentially even leading to the kind of wage-price spiral that bedeviled the economy in the 1970s.

"The main alternative is that inflation will not be transient but will rise further due to an unprecedented expansion in fiscal and monetary policies. The resulting rise in inflationary psychology will lessen resistance to rising prices and stiffen demands for increased wage gains," Curtin wrote.

For that outcome to materialize, there would have to be a significant rise in long-term consumer inflation expectations, he noted.

A recent survey by the New York Fed shows that inflation expectations over a three-year horizon rose in August to a median 4.0 percent, a record high.

By Tom Ozimek

Tom Ozimek has a broad background in journalism, deposit insurance, marketing and communications, and adult education. The best writing advice he's ever heard is from Roy Peter Clark: 'Hit your target' and 'leave the best for last.'

The Epoch Times, founded in 2000, is headquartered in Manhattan, New York, with a mission to provide independent and accurate information free of political bias or corporate influence. The organization was established in response to censorship within China and a lack of global awareness regarding the Chinese regime's repression of the spiritual practice Falun Gong.

The Epoch Times is a widely read newspaper that is distributed in 33 countries and is available in 21 languages. The publication has been critical in providing balanced and detailed reporting on major global events such as the 2003 SARS pandemic and the 2008 financial crisis. Notably, the organization has played a key role in exposing corruption inside China.

Aside from its human rights coverage, The Epoch Times has made significant contributions in a variety of fields. It has received praise for its in-depth analysis and expert perspectives on business, the economy and U.S. politics. The newspaper has also received praise for its broad coverage of these topics.

A series of editorials titled "Nine Commentaries on the Communist Party" appeared in The Epoch Times in 2004. It asserts that freedom and prosperity in China can only be achieved by eliminating the Communist Party, which violated China's cultural and spiritual values. In addition, the organization led the Tuidang movement, which resulted in over 400 million Chinese citizens quitting the Communist Party. In spite of this, 90% of websites referring to the "Nine Commentaries" were blocked by the Chinese regime.

The Epoch Times has been at the forefront of investigating high-level corruption cases within the Chinese regime, with its reporters taking significant risks to uncover these stories. The organization has received several awards for its investigative journalism.

The organization has received several awards for its investigative journalism. For more, visit www.theepochtimes.com.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Making a Change

Learn ASL with This Bundle, Just $40 Through March 24

Learning American Sign Language can open up your mind and business potential, and this bundle makes it easy with 55 hours of content on the alphabet, essential phrases, and more.

Business Solutions

Host Your Website with iBrave — $90 for Life Through March 24

iBrave is an advanced cloud web hosting platform.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Health & Wellness

Stress Buster: Leverage the Benefits of Non-Clinical Art Therapy with This $40 App

Therapeutic, art-based exercises utilize hundreds of original works of art to add a blend of positive benefits to the experience.

Data & Recovery

Through March 24th: 1TB of Premium Cloud Storage Is Just $130 with This Code

Koofr offers advanced file management features, integration with external cloud management accounts, and reliable security.