A survey of consumer sentiment done by the University of Michigan revealed that American consumers are currently more concerned about the higher prices of appliance products, houses and cars compared to any point in 37 years. The last time Americans felt this unhappy regarding the prices of big-ticket items was in 1982. At that time, the Federal Reserve was up against double-digit inflation.
The said consumer sentiment survey stated the prices of such purchases. It also submits comments regarding higher prices from comments discussing lower prices. The difference between the two plummeted this year. This indicates that there’s a large imbalance with regards to the comments, thanks to having more comments on higher prices.
The survey records spontaneous mentions of prices of these major purchases and subtracts comments about higher prices from comments about lower prices. The difference has plummeted this year, indicating a huge imbalance in the comments due to a much larger volume of comments on higher prices.
According to Richard Curtin, the survey’s chief economist, concern regarding prices of these items ran especially high among people within the top one-third of earners. Consumers in this category are responsible for over half of sales in retail.
Used cars’ prices increased by 7.3% in May. This followed another 10% increase back in April. The prices of homes reached record highs while the prices of appliances increased by 12.3% from last year, as per the latest Consumer Price Index report.
Expectations for Inflation
Despite this, the overall expectations of consumers have moderated in the first half of June. The preliminary survey for the month revealed that expectations for inflation went down a bit in May for both the one-year and five-year forecasts. But even with this decline, expectations for the upcoming year still remain at their highest in 10 years.
Consumer sentiment became better in the early weeks of June, according to the survey. It went from 82.9 at the end of May to 86.4. This gain was likely due to the rise in experience and expectations of households in the middle and upper-income brackets. This also raises doubts on whether the policies by President Joe Biden’s administration benefit lower-income households.