May 3, 2023
Consumers in the United States seem to be just as uncertain about the status of the economy as economists and the Federal Reserve.
According to the University of Michigan’s first assessment of consumer mood, people are only a little bit more hopeful now than they were in March. The total score increased from 62 to 63.5.
However, forecasts for inflation a year from now sharply increased to 4.6% from 3.6% a month earlier while remaining within the same 2.9% to 3.1% range they have been for the past 20 months. That occurs despite the fact that recent reports on inflation, including two this week, show a sharp decline.
According to Joanne Hsu, director of the Michigan poll, “consumer sentiment was essentially unchanged this month, inching up less than two index points from March.” Currently, sentiment is 27% higher than its all-time low from last June but is down about 3% from a year ago.
“Rising sentiment for lower-income consumers was offset by declines among those with higher incomes,” Hsu continued. “Consumers still anticipate high inflation to endure, at least in the short term, despite the fact that durable goods and automobile inflation has begun to ease. Consumers generally did not notice any significant changes to the economic climate in April.
The report comes after a Friday report on retail sales that revealed a significantly worse decrease than anticipated. When seen as a whole, the two studies depict a cautious consumer dealing with persistently rising inflation and high loan rates. Despite a recent slight softening, the labor market still seems to be robust.
“The two biggest bright spots were non-store retailers (online sales) and food service and drinking places, increasing 1.9% and 0.15% respectively,” said Mike Graziano, consumer products senior analyst at RSM US, of the retail report. “This provides some proof that consumer spending hasn’t completely shrunk.
Although the markets anticipate the Federal Reserve to keep raising interest rates when it meets early next month, the Federal Reserve said that its staff anticipates a mild recession later this year.
“Economic growth is shaping up to have been a bit stronger in the first quarter than we anticipated a month ago, and we now estimate that U.S. real GDP expanded at an annualized rate of 1.8% in Q1, which is about a full percentage point higher than our previous forecast,” wrote Sam Bullard, managing director and senior economist at Wells Fargo, in the company’s April economic outlook. “Upward revisions are related to stronger growth in housing and consumer spending in particular.”
Source: US NEWS
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