Consumer confidence in the United States dropped to its lowest point in 16 months as a result of continuing inflation and rising interest rates, which have made people more gloomy about the future than they have been in almost a decade.
Washington, D.C. Consumer confidence in the United States dropped to its lowest point in 16 months as a result of continuing inflation and rising interest rates, which have made people more gloomy about the future than they have been in almost a decade.
The Conference Board said on Tuesday that its consumer confidence index dropped to 98.7 in June from 103.2 in May, the lowest level since February 2021 and the second consecutive monthly loss.
The business research group’s expectations index, which measures consumers’ six-month expectations for economic, business, and labor market conditions, fell in June from 73.7 in May to 66.4, which is the lowest level since 2013. It has routinely performed poorly in the survey lately.
According to Lynn Franco, senior director of economic indicators at the Conference Board, “consumers’ more pessimistic perspective was driven by increasing concerns about inflation, particularly rising gas and food prices.” Expectations are currently significantly below the threshold of 80, which points to poorer growth in the second half of 2022 and a rising chance of a recession by year’s end.
The present situation index, which gauges how consumers feel about the state of the economy and the labor market, dropped by a little under a full point to 147.1 in June.
Inflation has increased over the past year at its quickest rate in more than 40 years, erasing wage increases for most Americans.
The Labor Department announced earlier this month that consumer prices increased 8.6% in May compared to a year earlier, outpacing April’s 8.3% increase. The Federal Reserve increased its main borrowing rate by a half percent in early May to rein in increasing inflation, and this move resulted in the new inflation statistic, which was the highest since 1981.
The producer price index, which tracks inflation before it hits consumers, increased 10.8% in May from a year earlier, adding to the pressure on the Federal Reserve to step up its efforts to combat unprecedented inflation.
The Federal Reserve’s main borrowing rate was raised by three-quarters of a point a few weeks ago in response, the largest increase since 1994. This year, more rate increases are anticipated.
According to a survey by the Conference Board, consumers are becoming more gloomy about their short-term financial prospects, short-term business circumstances, and the labor situation.
Purchasing intentions for big-ticket items — cars, homes, and major appliances — remained relatively stable, but rising costs for travel have forced Americans to dial back some vacation plans.
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