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Americans’ worries about rising inflation are suppressing consumer confidence and exacerbating concerns that the U.S. economy will be able to recover from the pandemic.
As consumers’ attitudes towards current and future conditions weakened, the University of Michigan’s consumer confidence survey dropped from 88.3 in May to 82.8 in May. Economists surveyed by Reuters believe this is compared with expectations that the closely watched indicator will rise to 90.4.
The decline in sentiment is surprising-the rapid introduction of vaccines in the United States, the further opening of the economy and the distribution of stimulus checks are all expected to boost consumer confidence.
Thomas Simons, a money market economist at Jefferies, said: “Consumers have begun to feel the bondage of inflation. They worry that the period of low inflation that we have experienced for decades is over.”
According to Richard Curtin, chief economist of the Consumer Survey, “Since the end of the last inflationary era in 1980, respondents believe that the purchase conditions for houses, cars and long-lasting household goods are the most unfavorable. “.
Data released earlier this week showed Consumer price increases In the 12 months to the end of April, this figure was 4.2%, the largest increase since 2008. This rise has exacerbated concerns that the US economy will overheat as economic activity heats up.
ING economist James Knightley said that recently Colony pipeline —The key artery that transports liquid fuel from the refinery to the eastern coastal states of the United States was closed for five days due to a cyber attack — then Gas price increase and buying panic May also “played a role.”
The Fed has repeatedly warned that any increase in inflation is temporary, although rising prices pose a challenge to policymakers as they continue to support the economy through massive fiscal and monetary stimulus.
A series of Fed officials scheduled to speak next week may hear investors’ expectations of higher consumer prices emerge. The news from policy makers will also be crucial in the coming months.
A report from the Ministry of Commerce showed that after strong growth in March, retail sales unexpectedly stagnated last month. This was driven by stimulus measures and loose restrictions, which led to a decline in consumer confidence.
Sales of clothing, sporting goods, hobbies, and bookstores, as well as online sales, all declined last month. The purchase of automobiles, auto parts, and electronics has increased, and spending in bars and restaurants has increased by 3%, which indicates that spending has shifted from goods to services.
However, some economists predict that consumer spending growth this year will be the strongest since 1946.
Curtin said: “The important thing is that consumer spending will continue to grow despite price increases due to pent-up demand and record savings balances.”
He added: “In the face of rising prices, the combination of continuous demand creates potential for inflationary psychology, contributing to the reasons for early purchase and the increase in the cost of living,” he added.
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