Sentiment regarding the U.S. economy is plummeting among American consumers, a new survey has revealed.
Consumer sentiment fell this month, despite upwardly revised figures, according to the University of Michigan.
In a newly released survey, the consumer sentiment index for November had deteriorated less than expected and was revised to 56.8 from initial projections of 54.7 percent.
The results were better than most economists’ expectations with the upward revision, but still below October’s reading of 59.9, despite the improved numbers.
“Consumer sentiment fell 5% below October, offsetting about one-third of the gains posted since the historic low in June,” said the survey’s director, Joanne Hsu.
“Along with the ongoing impact of inflation, consumer attitudes have also been weighed down by rising borrowing costs, declining asset values, and weakening labor market expectations,” she noted.
There was almost a 6 percent drop between October and November in the current economic conditions index and a slight drop in annual inflation expectations.
Current economic conditions fell to 58.8 in November from 65.6 in October, while the index of consumer expectations tumbled to 55.6 from 56.2.
The gauge, which measures consumers’ outlook on their own financial situation and the current state of the economy, stood far higher a year ago at 73.6.
“Uncertainty over these expectations remained at an elevated level, indicating that the general stability of these expectations may not necessarily endure,” Hsu said.
About 60 percent of consumers have already scaled back their spending in response to inflation and many are planning to further cut spending over the next 12 months, according to a separate University of Michigan survey.
Many respondents said that they were increasingly reluctant to borrow for major purchases, suggesting a sharp decrease in spending, as consumers start to increasingly draw on their savings to pay bills.
About 8 percent of households have reported that they are less likely to purchase items with large price increases over the next year, while another 51 percent of families said they were cutting back on their overall spending.
“Along with the ongoing impact of inflation, consumer attitudes have also been weighed down by rising borrowing costs, declining asset values, and weakening labor market expectations,” according to Hsu.
Consumer sentiment improved at the beginning of the fourth quarter, as gasoline prices sank from record highs but prices for necessities started to rise.
Higher prices and a responding jump in borrowing rates have led to slower economic growth, causing many households to be more conservative about future financial plans.
Meanwhile, Americans’ year-ahead view of inflation dropped to 4.9 percent in November from 5.0 percent last month.
Five-year long-run inflation expectations have risen slightly to 3 percent this month from 2.9 percent in October.
The Federal Reserve has been paying close attention to inflation expectations as a key gauge of future price trends.
However, the chance of a serious recession has been increasing, while the Fed continues its aggressive rate hike policy to control high inflation.
Based on data from the Consumer Price Index from October, the latest annual inflation rate is at 7.7 percent, which the central bank hopes to reduce to 2 percent by the end of 2023.
This week, a report by the Commerce Department saw orders for durables, such as appliances and cars, drop this month after making gains in October, falling 19 percent from its September level due to high interest rates and rising costs.