The University of Michigan’s Index of Consumer Sentiment dropped for a third consecutive month in September, coming in at 55.1 and falling short of the estimate for 55.4. Additionally, expectations for the labor market, business conditions, and personal finance took a hit as well, with respondents especially concerned about sticky inflation.
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“Consumers continue to express frustration over the persistence of high prices, with 44% spontaneously mentioning that high prices are eroding their personal finances, the highest reading in a year,” said Surveys of Consumers Director Joanne Hsu.
Inflation Expectations Remain Elevated
Personal Consumption Expenditures (PCE), which tracks the prices of a wide range of goods and services purchased by U.S. households and is the Fed’s preferred gauge of inflation, rose by 2.7% year-over-year in August. However, consumers expect higher inflation to return, with a year-ahead estimate of 4.7% and a long-term estimate of 3.7%.
Consumers remain worried about the risk of persistent inflation and a weakening labor market. One interesting finding from the survey is that sentiment from participants with large stock holdings remained unchanged on a monthly basis, while sentiment among those with little or no stock holdings dropped.
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