Preliminary results in the University of Michigan’s monthly consumer sentiment survey shows the index dropping 11.7% (80.4 to 71.0) compared to the same time a year ago, but up about 1% from August (70.3), according to a university announcement on Friday (Sept. 17).
The monthly index of consumer expectations was down 11.2% from September 2020 to this month (75.6 to 67.1) and up 3.1% from August’s results (65.1).
Final September data will be available on Oct. 1 at 10 a.m. ET.
“The steep August falloff in consumer sentiment ended in early September, but the small gain still meant that consumers expected the least favorable economic prospects in more than a decade,” said Surveys of Consumers Chief Economist Richard Curtin in the University of Michigan announcement.
Buying attitudes for household durables fell again in early September to a level that hasn’t been seen since 1980, and long-term prospects fell to their lowest level in this decade, he said.
“The decline in assessments of buying conditions for homes, vehicles and household durables left all three near all-time record lows, with the declines due to spontaneous references to high prices,” said Curtin. “Some observers anticipated that the early August plunge in confidence would quickly disappear since it was driven by emotions. Many other sources of economic data have since shifted in the same direction, and point toward slower growth in consumer expenditures and purchases of housing to the end of 2021.”
Consumers could postpone their purchases, which would mean a spending slowdown for the rest of this year and a fuller recovery in 2022, said Curtin. “The main alternative is that inflation will not be transient, but will rise further due to an unprecedented expansion in fiscal and monetary policies,” he explained. “The resulting rise in inflationary psychology will lessen resistance to rising prices and stiffen demands for increased wage gains. This reaction takes a long time to fully develop and is contingent on significant increases in long-term inflation expectations, which have yet to be observed.”
Some consumers will focus on getting raises to accommodate their continued spending, Curtin noted.
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