A recent survey of consumer sentiment reveals that Americans are expressing more concerns about the future of the economy, despite the sentiment hanging close to a two-year high in August. The University of Michigan reported that the final reading of the sentiment survey slipped to 69.5 from a preliminary 71.2, following a peak in July.
Key Details
The survey includes two significant measurements related to consumer perception of the economy. The gauge measuring the current state of the economy registered 75.7 at the end of August, slightly lower than the initial reading of 77.4. Additionally, the measure asking about expectations for the next six months decreased from an initial 67.3 to 65.5.
Furthermore, Americans anticipate inflation to average at 3.5% in the next year, which is slightly higher compared to previous months. The official rate of inflation, based on the consumer price index, stands at 3.2%, although other measures suggest a slightly faster increase in prices.
The Big Picture
Despite steady economic growth, extremely low unemployment rates, and slower inflation, concerns among Americans about a potential recession have diminished. However, interest rates remain high and are expected to stay that way throughout the next year as the Federal Reserve works towards taming inflation. This could lead to increased borrowing costs, potentially impacting the economy and raising unemployment rates.
Looking Ahead
Joanne Hsu, the director of the survey, explains that consumers now perceive the rapid improvements in the economy over the past few months as having tapered off, especially concerning inflation. As a result, consumers are currently tentative about what lies ahead.
Market Reaction
On Friday, there was a positive market reaction observed as both the Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) experienced growth in trading.
