US consumer sentiment ebbs in June; inflation worries linger
US CONSUMER sentiment deteriorated in June as households worried about inflation and incomes, a survey showed on Friday (Jun 14).
Retreating inflation pressures amid lower prices for petrol and other goods as major retailers, including Target, slash prices on essentials ranging from food to diapers, are so far not brightening moods among consumers.
The stock market rally has not helped morale either. The University of Michigan said its preliminary reading on the overall index of consumer sentiment came in at 65.6 in June, the lowest level since November, compared to a final reading of 69.1 in May. It was the third straight monthly decline.
Sentiment soured across political party affiliation, though Democrats in general remained more upbeat compared to Republicans and Independents.
Economists, who had forecast a preliminary reading of 72, attributed the University of Michigan’s ongoing transition to web-based interviews from telephone surveys for part of the continued decline in sentiment.
Consumers were less upbeat about their personal finances, with worries about high prices staying in the forefront.
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At face value, the continued deterioration in sentiment would suggest softer consumer spending.
The correlation between the two is, however, weak. The University of Michigan noted that consumers this month “perceive few changes in the economy from May.” The survey’s reading of one-year inflation expectations was unchanged at 3.3 per cent. Its five-year inflation outlook rose to 3.1 per cent from 3 per cent in May.
“Falling petrol prices, if sustained, should temper consumers’ short-term inflation expectations later this month and in July,” said Nationwide financial market economist, Oren Klachkin, financial market economist at Nationwide.
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“The uptick in longer-term (inflation) expectations ... is a reminder of the challenges that high prices pose and why the Fed needs to bring inflation sustainably down to (its) two per cent goal.” REUTERS
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