Heading into the all-important holiday shopping season, American consumers are still not very confident on the state of the US economy.
The University of Michigan Consumer Sentiment Index landed at 56.8 in November, up from the previous reading of 54.7 measured earlier this month, but lower than the 59.9 recorded in October.
Economists were expecting a reading of 55, according to Refinitiv consensus estimates.
According to Joanne Hsu, the university’s director of consumer surveys, the month-on-month decline in sentiment offset about one-third of the gain since the index bottomed in June.
“The headwinds of consumer power have begun to emerge. So far, high incomes have helped consumers, especially lower-wage workers, cope with high inflation,” Hsu said in a statement. “However, their perception of a weakening labor market could cause them to reduce their spending in the future. Wealthier households face declining stock markets and housing values, which would also affect their willingness to spend.”
Consumers surveyed also highlighted the effects of rising interest rates on their desire to buy homes, cars and other expensive items. The Federal Reserve has adopted a series of steep interest rate hikes in an effort to combat decades of high inflation.
About 83% of respondents to a University of Michigan consumer survey said now is a bad time to buy a home. According to the university, this is the highest proportion ever recorded.
The survey also showed that consumer inflation expectations for this year and the next five years remained relatively unchanged at 4.9% and 3%, respectively. This is a key data point for the Federal Reserve. If consumers believe that prices will remain high, this could lead to increased wage demands, which could cause companies to raise prices.
Earlier this month, when preliminary survey data were released, Hsu noted that very few consumers were buying in advance to avoid higher interest rates in the future. This is an indication that expectations are not deteriorating, she stated at the time.
Still, Hsu warned on Wednesday that uncertainty around those expectations remains at an elevated level, “suggesting that the overall stability of those expectations may not sustain.”