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Thursday, December 2, 2021

Inflation problems have pushed consumer sentiment down to a decade low

According to a University of Michigan study in which consumer sentiment in the United States fell to a ten-year low in November, inflation and a growing feeling among Americans that no effective measures were taken to contain price increases are to blame.

The university’s latest consumer sentiment index fell to 67.4 in November, about four percentage points below October’s 71.7 percent and a 10-year low.

“The decline was due to a combination of rapidly rising inflation coupled with a lack of federal policy that could effectively offset inflationary damage to household budgets,” study director Richard Curtin said in a statement.

Curtin said that one in four respondents to the survey “pointed to an inflationary decline in their living standards,” while respondents in general “expressed less optimism in the November 2021 survey than at any time in the past decade. , regarding the prospects of their own finances, as well as the general economy. “

The soaring inflation has become a key concern amid the economic recovery from the pandemic, which is growing faster than wages and reducing the purchasing power of Americans.

“Concerns about inflation are weighing on consumer confidence,” Greg McBride, chief economic analyst at bank rates, told The Epoch Times in an email statement. “When household spending grows faster than income, it reduces purchasing power, which in turn constrains economic growth.”

While average hourly wages rose 4.9% in the year to October, the Labor Department said in its latest release of U.S. earnings data (pdf), higher consumer price inflation rates during the year of 6.2% mean that wages have actually declined. by about 1.3 percent in real terms.

The Michigan Sentiment Survey found that more consumers in November than in October expected their real incomes to decline.

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“Consumers were expecting a decline in inflation-adjusted income,” Curtin said, adding that they also expect cuts in inflation-related spending to have a negative impact on the economy next year.

For now, consumers are showing no sign of spending containment due to high inflation, with a November 24 Commerce Department report showing that consumer spending, which accounts for about two-thirds of US economic output, jumped 1.3 percent in October after rising. 0.6 percent in September.

And a recent report from the Boston Consulting Group (pdf) showed that a net 18 percent of US consumers plan to spend more on Black Friday this year than last.

But the recently released minutes of the Fed’s policy meeting in early November showed officials were worried about persistent price pressures, softened their tone on “transient” inflation, and acknowledged the growing risk that future inflation expectations could become untied, potentially leading to to changes in the structure of expenses and increased requirements for wages.

While Fed officials believed that the increased price pressures were mainly due to production bottlenecks and other factors that they believed were temporary, they agreed that they should be less convincing in their justification for “temporary” inflation. They also pledged to use monetary policy to try and tame higher prices if inflationary pressures get stronger.

To follow

Tom Ozimek has extensive experience in journalism, deposit insurance, marketing and communications, and adult education. The best writing advice he has ever heard is from Roy Peter Clarke: “Hit your target” and “leave the best for last.”

World Nation News Deskhttps://www.worldnationnews.com
World Nation News is a digital news portal website. Which provides important and latest breaking news updates to our audience in an effective and efficient ways, like world’s top stories, entertainment, sports, technology and much more news.
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