Consumer sentiment about the U.S. economy has weakened but is still near its recent peak, and Americans’ outlook for this year remains largely unchanged.
The University of Michigan Consumer Sentiment Index, released in a preliminary version on Friday, fell to 77.9 this month, compared to 79.4 in March. Sentiment is about midway between its all-time low reached in June 2022, when inflation peaked, and its pre-pandemic averages. The survey has been conducted since 1980.
“With the upcoming election, which many consumers believe could have a significant impact on the direction of the economy, consumers are reluctant to assess the economy,” said Joanne Hsu, director of consumer surveys.
The index had only fallen to 61.3 in November before posting its sharpest rise in more than three decades in the following two months. Since then, it has mostly moved sideways.
Greater consumer optimism can sometimes lead to higher spending, which typically stimulates the economy. Most economists expect consumer spending to remain healthy as long as the labor market remains strong.
“Looking beyond the recent low monthly volatility, sentiment remains bullish,” Oren Klachkin, economist at Nationwide, said in a research note. “It’s still a positive environment for the consumer.”
Among the survey’s respondents, Republican sentiment fell the most. It fell slightly among independents and rose slightly among Democrats. Americans’ economic views have become more influenced by political partisanship in recent decades.
A Increase in gas prices This likely contributed to the decline in the consumer outlook, according to Ian Shepherdson, chief economist at Pantheon Macroeconomics. The average national price According to AAA, the price per gallon of gasoline increased about 7% from last month to $3.63 per gallon.
Americans’ perceptions of future inflation also rose, likely reflecting still-high prices. Consumers expect inflation to be 3.1% a year from now, which would be above the Federal Reserve’s 2% target. However, this would be below the current level of 3.5%.
Inflation has fallen since peaking at 9.1% in the summer of 2022 but has remained elevated so far this year. Excluding fluctuating food and energy costs, prices rose 3.8% in March from a year earlier, the same level as the previous month and well above the Fed’s target.