Consumer sentiment continues to drop as inflation drives up prices
WASHINGTON (TND) — It’s already proving to be an expensive summer, from gas and grocery prices to plane tickets.
To counter inflation, the Federal Reserve is using tools like raising interest rates to cool demand but many economists warn the only way out of this inflation is a recession.
New polling shows Americans are worried, too. As prices go up, Americans’ sentiment is going down.
Feelings about the economy are at an all-time low for the University of Michigan’s Consumer Sentiment Index.
“Throughout the survey people are consistently, spontaneously bringing up prices, gas prices, house prices,” said Joanne Hsu director of the Surveys of Consumers.
This week started with the average gas price at $4.89 per gallon, according to AAA. That's down 9 cents from a week ago but up $1.80 from this time last year.
Many first-time homebuyers are getting priced out as rising interest rates meet already-high home prices.
According to Zillow, in May, monthly mortgage payments for an average home was more than 47% higher than the year before at $2,031 — assuming the buyer made a 20% down payment.
Right now, 58% of adults say they’re concerned about how much savings they have, according to a recent Bankrate survey, up from 48% who said that last year.
“Ironically people actually have more savings than they’d had up until a couple of years ago before the pandemic but what’s eroding very quickly is the comfort level in that savings and the reason being inflation at a four-decade high,” said Greg McBride, chief financial analyst with Bankrate.com.
Worries about money have translated into political frustration with 66% of U.S. adults disapproving of how President Joe Biden is handling the economy. Even more, 71%, disapprove of how he’s handling inflation, according to a new CBS-YouGov poll.
When asked where they expect the economy to be as they and their family plan for the next year, 25% say “slowing but not in recession” while 44% said “in recession.”
Despite the worry, people are still spending. This Fourth of July weekend, the National Retail Federation forecasts that Americans will spend $200 million more on food than they did last year and AAA projects more people will travel than last year.
