Arya News - Independent voters’ economic anxieties highlight political implications of plummeting US consumer sentiment.
Consumer sentiment in the United States hit a near-record low in the final reading before the consequential midterm elections as cost-of-living issues weigh on US consumers.
The University of Michigan’s Surveys of Consumers said its Consumer Sentiment Index dropped on Friday as continuing tensions between the US and Iran drove up prices at the grocery store and the petrol pump.
The reading dropped to 48.0 this month from a final reading of 48.1 in September, leading to the second-lowest reading on record. The lowest was only a few months ago in May, when it stood at 44.8 points.
The report measures how consumers feel about their personal finances at present and how they expect it will change over the next 12 months; whether they feel it is a good time to make major household purchases; and their expectations for the US economy over the next 12 months, as well as five years.
“Purchasing power continues to dominate consumer views of the economy,” said Joanne Hsu, the director of the Surveys of Consumers. “Sentiment is now 10 percent below a year ago and 15 percent less than February, just prior to the Iran conflict.”
Political pressure
Crucially, weaker sentiment was fuelled by self-identified political independents. The group’s sentiment dropped to 42.4 points, slightly above the all-time low of 40.6 points, which it reached in May.
Since January, the number of independents pointing to inflation pressures hurting their financial situation rose by 27 percent. Republicans referencing the same issue rose by 52 percent, and the figure rose by 15 percent among Democrats.
Households with no or limited exposure to the stock market — which until recently had been soaring on enthusiasm for the artificial intelligence investment boom — have also cited high prices as a drag on their finances more frequently than at the start of the year.
Consumers’ expectations for inflation over the next five years rose to 3.5 percent from 3.4 percent in September and 3.2 percent in March.
“Consumers broadly expect inflation to accelerate, and this year’s increases in inflation expectations are not limited to one part of the political spectrum,” Hsu wrote. “The fact that aggregate consumer spending has been relatively resilient despite negative views of the economy provides another reason for caution. If part of consumption currently reflects precautionary spending to avoid future price hikes, disinflation may be even more difficult to achieve.”
The sentiment comes amid heightened prices for consumers . Inflation rose by 3.7 percent year on year last week, according to the recent consumer price index report, and petrol prices remain high, although lower than a month ago.
The average price for a gallon of petrol is $4.29 ($1.13 per litre) on Friday, down from $4.47 ($1.18 per litre) this time last month, according to the American Automobile Association (AAA), which tracks daily petrol prices.
Friday’s report comes in advance of the final monetary policy decision before the midterm elections. On Wednesday, the Federal Reserve is largely expected to maintain rates at 3.75–4.00 percent after raising rates by 25 basis points in September. CME FedWatch, which tracks the likelihood of certain monetary policy decisions, forecasts an 89.5 percent chance that rates will remain unchanged.