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US Consumer Sentiment Drops Again in November, Inflation Expectations Rise

U.S. consumer sentiment fell for a fourth straight month in November and households’ expectations for inflation rose again, with their medium-term outlook for price pressures shooting to the highest level in more than a dozen years, a survey showed on Friday.

The University of Michigan’s preliminary reading of its Consumer Sentiment Index dropped to 60.4, the lowest level since May, from October’s final reading of 63.8.

The median expectation among economists in a Reuters poll had been for the index to be little changed at 63.7.

The survey’s preliminary gauge of current conditions fell to 65.7 from last month’s final level of 70.6, while the expectations index slid to 56.9 from 59.3 in October. Like the headline index, both sub-indexes were the lowest since May.

“While current and expected personal finances both improved modestly this month, the long-run economic outlook slid 12%, in part due to growing concerns about the negative effects of high interest rates,” Joanne Hsu, the director of the University of Michigan’s Surveys of Consumers, said in a statement. “Ongoing wars in Gaza and Ukraine weighed on many consumers as well.”

Consumers’ outlook for inflation in the year ahead rose for a second month to a seven-month high of 4.4%, “indicating that the large increase between September’s 3.2% reading and October’s 4.2% reading was no fluke,” Hsu said.

Meanwhile, over a five-year horizon, consumers expect inflation to average 3.2%, up from 3.0% in October and the highest since March 2011.

Officials at the Federal Reserve, which has raised interest rates by 5.25 percentage points since March 2022 to lower inflation from four-decade highs, pay close attention to consumers’ attitudes about price trends. They are keen to see inflation expectations trend lower so as not to alter consumption behavior that could reverse the gains they have made in slowing the pace of price increases.

Source : Reuters