Perception is reality, goes the old saying.
And the perception right now is that inflation is a staple of everyday life, that no one should trust a lull, and that economic conditions are challenging.
As measured by the University of Michigan, sentiment among U.S. consumers fell for a fourth straight month in November.
And those same consumers see inflation on an entrenched path: up and to the right, right now and over the long term.
The latest data came in at 61.3, a slight improvement over preliminary readings of 60.4 for the month, down from October’s 63.8 level.
In remarks from Surveys of Consumers Director Joanne Hsu, “younger and middle-aged consumers exhibited strong declines in economic attitudes this month, while sentiment of those age 55 and older improved from October.”
The assessment of long-run business conditions plunged by 15% to its lowest since July 2022, per the data.
Amid the waning sentiment, the data showed that year-ahead inflation expectations rose to 4.5% this month, up from 4.2% in October. That’s the highest level seen since April of this year. The long-run inflation expectations have also been less than sanguine, as consumers see inflation at 3.2%, where that level had been 3%.
Per Hsu’s comments on inflation: “These expectations have risen in spite of the fact that consumers have taken note of the continued slowdown in inflation; consumers appear worried that the softening of inflation could reverse in the months and years ahead.”
In other words, consumers don’t necessarily think that the slowdown has legs, so to speak.
Since households think inflation is here to stay, and they have shown declining expectations for business conditions and their own “economic attitudes” are pressured, it follows that they would tighten their fiscal belts.
As PYMNTS Intelligence noted in the latest Paycheck-to-Paycheck report, done in collaboration with LendingClub, 4 in 10 consumers consider themselves worse off relative to 2022. Sixty-eight percent of consumers living paycheck to paycheck (a designation that applies to 60% of the population) said their financial situation has worsened in the past year.
As many as 62% of consumers surveyed are very or extremely concerned about the economic outlook, and 58% are still seeing inflation exceed growth in their paychecks.
The holidays are firmly upon us, yet there seems to be some ambivalence over what we can spend, and where we’ll get the money. The joint PYMNTS Intelligence/LendingClub surveys showed that among all consumers, 22% expect their spending to be higher, but most attribute this to higher prices.
The read-across is that we won’t necessarily buy more items/gifts for those we love; the baskets will be, at best, comparable to last year but cost more. Only 26% of consumers said they would spend more because there’s a greater amount of money on hand to spend. Consumers said they would finance 13% of their holiday spending with options such as credit cards. Separately, more than one-third of consumers said they plan to spend at least some part of their savings to cover holiday spending.
We seem determined to give gifts to those we love and bear some financial pressure in the meantime while gritting our teeth for the long, wearying battle with rising prices.
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