Sentiment Slips as Inflation Weighs on Consumers Perceptions of Finances

Summary Despite an improving COVID situation, consumer sentiment moved to a fresh decade low in early February amid a deterioration in household finances. Concern over higher inflation appears to be the main culprit, with near-term inflation expectations rising to the highest level since 2008 and concern over higher prices weighing on income and buying prospects. Sentiment Reaches Fresh Decade Low Consumers became more downbeat in early February according to the preliminary read on consumer sentiment from the University of Michigan. The headline index dropped to 61.7 (chart), marking a fresh decade low as both views on current conditions and expectations about the future moved lower. This slide in sentiment came even as the COVID situation in the U.S. has improved quite dramatically over the past month. New daily case counts have moved significantly lower, and the hospitalization rate has peaked. The details of the report suggest weaker expectations around consumers’ financial situation was the main culprit behind the decline. Consumers’ views of their finances versus a year ago fell to the lowest level since 2013 (chart). This shouldn’t come as a surprise when considering the massive amount of fiscal support reaching households at the onset of the pandemic has now ended, and households continue to contend with higher prices. READ FULL ARTICLE>>