Americans are becoming gloomier about the economy with interest rates at a 22-year high and economic growth widely expected to slow.
The University of Michigan’s measure of consumer sentiment fell 5% in November, according to a preliminary reading released Friday. That was the fourth consecutive month that sentiment soured, after improving over the summer.
The drop was mostly driven by the expected effects of higher interest rates.
“Ongoing wars in Gaza and Ukraine weighed on many consumers as well,” the university’s surveys of consumers director, Joanne Hsu, said in a release.
Changes in how consumers are feeling varied greatly. Sentiment among young and lower-income US consumers declined the most in the beginning of the month, while sentiment among “the top tercile of stock holders improved 10%, reflecting the recent strengthening in equity markets,” the release said.
Meanwhile, both short-term and long-term inflation expectations worsened this month. Americans’ expectations for inflation rates in the year ahead rose to 4.4% in November, up from October’s 4.2% reading. That’s up markedly from September’s 3.2% and is the highest reading since November 2022.
In a worrisome sign for the Federal Reserve, long-run inflation expectations rose to 3.2% this month, the highest level since 2011. The Fed is intently focused on Americans’ perceptions of inflation. If people simply accept higher prices as a new normal that can make the central bank’s job of taming inflation extremely difficult.
This story is developing and will be updated.
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