The University of Michigan’s closely watched Surveys of Consumers consumer sentiment index was released and it shows that as American consumers continued to pay record prices for gas, food, and other goods and services, consumer sentiment dropped to record lows. The final June survey was revised down to 50.0.
In the series, this is the lowest reading on record, going back to the mid 1970’s. In the preliminary survey for the month, the index read 50.2. May’s reading was 58.4.
The key contributor to the lower numbers remained inflation which was shown to have increased at the highest rate in 40 years in May.
Joanne Hsu, director of the Surveys of Consumers, said, “The final June reading confirmed the early-June decline in consumer sentiment … Consumers across income, age, education, geographic region, political affiliation, stockholding and homeownership status all posted large declines. About 79% of consumers expected bad times in the year ahead for business conditions, the highest since 2009. Inflation continued to be of paramount concern to consumers; 47% of consumers blamed inflation for eroding their living standards, just one point shy of the all-time high last reached during the Great Recession.”
Near term inflation expectations for the year ahead are still high at 5.3%, but longer-term expectations moderated, dropping to 3.1% from the preliminary report, which read 3.3%.
The University of Michigan’s report was not the only gloomy economic news coming in. The preliminary S&P Global Composite Purchasing Managers’ Index (PMI) came in at 51.2 for June, which was the worst reading since January. At the same time the S&P’s manufacturing output index also came in at a two-year low, well into contractionary territory.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said Business confidence was at “a level which would typically herald an economic downturn, adding to the risk of recession.”
A Conference Board survey last week showed that 60% of CEOs said they expect that before 2023 we will see a recession. At the same time, analysts from Goldman Sachs to Citigroup are also increasing their forecasts for a recession, as the Fed makes clear its number one priority is getting control of inflation.
The University of Michigan’s report also showed consumers expect elevated inflation, although they expect it slightly less a year from now, at 5.3%, than they had in the preliminary report. which read 5.4%.
Hsu said, “Consumers also expressed the highest level of uncertainty over long-run inflation since 1991, continuing a sharp increase that began in 2021.”
