Consumer sentiment falls amid worries of higher prices, rising interest rates

Consumer sentiment is back in the summer doldrums.

The University of Michigan’s overall index of consumer sentiment  fell to 54.7— its lowest level since July — in preliminary results for November, down 5.2 points from 59.9 in October. The decrease came amid ongoing worries about inflation and higher interest rates.

Sentiment also fell for current economic conditions, down to 57.8 from 65.6 in October,  as well as for those in the near future, falling to 52.7 from 56.2 the preivous month.

The data for the surveys was collected prior to a better-than-expected Consumer Price Index report, which showed that inflation slowed to 7.7% in October, and the mid-term elections. A report from Adobe revealed that online prices decreased 0.7% year-over-year and rose 0.3% month-over-month in October.  

“All components of the index declined from last month, but buying conditions for durables, which had markedly improved last month, decreased most sharply in November, falling back 21% on the basis of high interest rates as well as continued high prices,” stated Joanne Hsu, director, surveys of consumers, University of Michigan.

Hsu added that the declines in sentiment were seen across the distribution of age, education, income, geography, and political affiliation, showing that the recent improvements in sentiment were tentative.

“Instability in sentiment is likely to continue, a reflection of uncertainty over both global factors and the eventual outcomes of the election,” she said.

Inflation expectations are little changed, the report noted. The median expected year-ahead inflation rate was 5.1%, up from 5.0% last month. Long run inflation expectations, currently at 3.0%, have remained in the narrow (albeit elevated) 2.9-3.1% range for 15 of the last 16 months.

Final sentiment data for this month will be released Nov. 23.