US Consumer Feels Weaker Despite Stronger Employment

The US consumer has been keeping the US economy afloat during these turbulent times, even with inflation and interest rates surging in the last two years. But, it seems like everything that has been going on is taking a toll on the ordinary citizen, and consumer indicators such as consumer sentiment and retail sales have been weak.

US UoM Consumer Sentiment Chart

The latest consumer sentiment data from the University of Michigan, which followed 2 consecutive months of higher-than-expected inflation, underscores ongoing concerns about rising prices among consumers. Despite a slight dip in enthusiasm about the economy, consumers are still optimistic that inflation will decrease in the future, suggesting a belief that the current price hikes may eventually moderate. This sentiment reflects a delicate balance between consumers’ apprehensions about inflation and their overall economic outlook.

March 2024 US Consumer Sentiment from the University of Michigan

• UMich March prelim consumer sentiment 76.5 points vs 76.9 points expected
• February prelim consumer sentiment was 76.9 points
• Current conditions 79.4 points vs 79.2 points expected (prior was 79.4 points)
• Expectations 74.6 points vs 75.1 points expected (prior was 75.2 points)
• One-year inflation 3.0% vs 3.0% prior
• Five-year inflation 2.9% vs 2.9% prior

In analyzing the survey results, “small improvements in personal finances were offset by modest declines in expectations for business conditions,” stated Surveys of Consumers Director Joanne Hsu.

According to the survey, while personal finances improved slightly, this was offset by modest falls in expectations for business conditions. Despite considerable advances between November 2023 and January 2024, consumer sentiment has stabilized, with little evidence indicating either economic progress or decline.

Many consumers are deferring judgment on the economy’s trajectory, particularly in the long run, as they await the results of the impending November presidential election in the US. Given that last month’s rating was the highest since 2021, the drop in consumer sentiment is not seen negatively. It demonstrates consumers’ more cautious view, which is likely driven by economic uncertainty and the forthcoming election.