Consumer sentiment is falling to a record low in the midst of rising inflation
The final reading for June will be published on 24 June.
All components of the index fell, Hsu said, noting a 24% drop in business prospects for the year ahead and a 20% decline in consumers’ assessments of their personal finances.
About 46% of consumers surveyed blamed inflation, up from 38% in May, Hsu said.
“This share has only been exceeded once since 1981, during the Great Recession,” she said. “Overall, gas prices weighed heavily on consumers, which was no surprise given the 65-cent increase in national gas prices from last month.”
Half of consumers mentioned gas prices during the interviews, she said.
“Consumption spending has long defied fluctuations in consumer sentiment,” said Greg McBride, Bankrates’ financial analyst. “What we are likely to see this time is not that consumers are cutting back on spending, it is just that they are spending differently. This is an environment where necessities are chewing more and more of a household’s usable dollars.”
How consumers react from here could help or hurt the Federal Reserve’s efforts to curb inflation, wrote Kurt Rankin, PNC senior economist, in a note.
“Consumers will either choose to continue using despite higher prices, making the Fed’s choice more difficult through the second half of this year, or to withdraw spending in response to higher prices – especially regarding daily necessities,” he said. “A spending cut will slow the economy more in the immediate horizon, but could be the difference in shallowing the depth of any potential recession in 2023 by making the Fed’s job a little easier.”
