Consumer Sentiment Crashes Back Down Toward Four Decade Lows

The views of U.S. consumers about the economy turned much grimmer in the first weeks of November, the University of Michigan’s consumer sentiment survey showed on Friday.

The index of consumer sentiment fell about nine percent to a reading of 54.7 in the preliminary November reading, pulled down by a much more negative view of current economic conditions.

The index that tracks the assessment of current conditions dropped by nearly 12 percent to 57.8 from 65.6. The index of expectations fell six percent 52.7 percent.

The decline erases about half the gain from the all time low hit in June. Not counting June and July, this is the worst reading since 1980, below the lows of the 2008 financial crisis and the 2011 debt ceiling fight that resulted in the credit rating of the U.S. government being downgraded.

“All components of the index declined from last month, but buying conditions for durables, which had markedly improved last month, decreased most sharply in November, falling back 21 percent on the basis of high interest rates as well as continued high prices,” Joanne Hsu, the director of the survey, said.

The decline in sentiment was widespread across Americans of many backgrounds.

“Overall, declines in sentiment were observed across the distribution of age, education, income, geography, and political affiliation, showing that the recent improvements in sentiment were tentative. Instability in sentiment is likely to continue, a reflection of uncertainty over both global factors and the eventual outcomes of the election,” Hsu said.

Inflation expectations crept up for the second consecutive month. The median expected year-ahead inflation rate rose to 5.1 percent from 5.0 in October and 4.7 percent in September. The long-run inflation expectations rose to 3.0 from 2.9 in October and 2.7 in September. September now looks like it was the ebb-tide for expectations that are now once again trending upward.