Consumer sentiment about the U.S. economy has slightly decreased but remains close to a recent high, with Americans' outlook showing minimal change this year. The University of Michigan's consumer sentiment index, released in a preliminary version, dropped to 77.9 this month from March's figure of 79.4. This sentiment level is positioned between its all-time low recorded in June 2022 during peak inflation and its pre-pandemic averages. The survey, conducted since 1980, provides valuable insights into consumer perceptions.
According to the director of the consumer survey, consumers are holding back judgment on the economy due to the upcoming election, which many believe could significantly impact the economic trajectory. Despite the minor decline this month, the index has shown a positive trend overall, indicating a favorable environment for consumers. Strong consumer optimism often leads to increased spending, which can stimulate economic growth, especially when supported by a robust job market.
Political partisanship seems to influence Americans' economic views, with sentiment among Republicans experiencing the most significant decline, a slight decrease among independents, and a small rise among Democrats. Rising gas prices have likely contributed to the dip in consumer outlook, with the national average price per gallon increasing by about 7% to $3.63.
Consumers' expectations of future inflation have also risen, reflecting the persistently high prices. The anticipated inflation rate for the coming year stands at 3.1%, surpassing the Federal Reserve's 2% target but remaining below the current level of 3.5%. Inflation, which peaked at 9.1% in the summer of 2022, has moderated but remains elevated this year. Excluding food and energy costs, prices rose by 3.8% in March from a year earlier, exceeding the Fed's target.
Overall, while there has been some fluctuation in consumer sentiment, the general outlook remains positive, with expectations of continued economic stability as long as the job market remains strong. The evolving economic landscape, influenced by factors such as political events and price fluctuations, continues to shape consumer perceptions and behavior.
