Consumer sentiment in the US has witnessed a decline for the second consecutive month in September 2021, according to the University of Michigan’s preliminary reading of its Consumer Sentiment Index. The index recorded a dip from 69.5 in August to 67.7 this month, indicating that American households are becoming increasingly cautious about their economic outlook. Despite this decline, some positive indicators in the survey hint at a potential silver lining.
One significant factor contributing to the drop in consumer sentiment is the decline in household expectations for near-term inflation, which has reached its lowest point in over a year. The University of Michigan’s survey, conducted under the direction of Joanne Hsu, revealed that the one-year inflation expectation fell from 3.5% to 3.1%, marking its lowest level since March 2021. Additionally, the five-year inflation outlook also decreased to 2.7%, a one-year low. This decrease in inflation expectations may help alleviate some concerns among consumers and create a more optimistic atmosphere.
The survey further analyzed consumer sentiment by dividing it into two key components: the barometer of current economic conditions and the gauge of consumer expectations. The former showed a decline, reflecting a less favorable view of the present economic situation. In contrast, the latter exhibited a slight increase, indicating that while consumers may be apprehensive about the present, they are somewhat more optimistic about the future.
Joanne Hsu, the survey director, expressed her insights, stating, “Both short-run and long-run expectations for economic conditions improved modestly this month, though on net consumers remain relatively tentative about the trajectory of the economy.” This sentiment underscores the cautious optimism prevailing among American consumers, who are closely monitoring the evolving economic landscape.
Economists and analysts are closely watching these trends as they attempt to gauge the overall health and resilience of the American economy. The consecutive decline in consumer sentiment raises questions about the potential impact on consumer spending, a crucial driver of economic growth. While decreased near-term inflation expectations could alleviate some concerns, it remains to be seen whether this shift in sentiment will translate into increased consumer confidence and spending.
The University of Michigan’s Consumer Sentiment Index is widely regarded as an important economic indicator, offering valuable insights into consumer attitudes and expectations. As the nation continues to grapple with the aftermath of the COVID-19 pandemic and various economic challenges, tracking changes in consumer sentiment becomes even more critical.
In conclusion, the September 2021 Consumer Sentiment Index from the University of Michigan reveals a slight dip in US consumer sentiment for the second consecutive month. While the decline in the barometer of current economic conditions is concerning, the drop in near-term inflation expectations may provide a glimmer of hope. As American households cautiously navigate the economic landscape, economists will closely monitor these developments to gain a clearer understanding of the trajectory of the US economy in the coming months.
Source: Reuters
