The Read-Through On Inflation, Spending From The Latest University Of Michigan Consumer Sentiment Survey

Zinger Key Points
  • Long-term inflation is expected to settle in the range of 2.9%-3.1%.
  • 79% of consumers expected bad times in the year ahead for business conditions, the highest since 2009.

On Friday, the University of Michigan Surveys of Consumers released the consumer sentiment index for June 2022.

What Happened: The consumer sentiment index for June was 50.0, resulting in a -14.4% change since May, which was the lowest report on record.

The decline in consumer sentiment is broad based and impacted by current economic conditions and consumer expectations, according to the survey.

As the June 2021 consumer sentiment index was measured at 85.5, resulting in a -41.5% change year-over-year, we can infer consumer spending was also significantly higher then, contributing to rapid inflation growth.

According to the survey, “47% of consumers blamed inflation for eroding their living standards, just one point shy of the all-time high last reached during the Great Recession.”

Why Consumer Sentiment Matters: The consumer sentiment index is an important indicator as it measures consumer confidence in regards to their financial situation and overall sentiment on the economy.

In March 2022, consumer sentiment declined to a measure of 59.4, while the consumer price index increased 1.2%. Higher consumer sentiment can contribute to higher inflation, yet this decline shows the impact inflation has on consumer spending.

Inflation Expectations: With the median expected year-ahead inflation rate little changed over the preceding four months at 5.3%, the survey said, long-term inflation is expected to settle in the range of 2.9%-3.1%. This is important as the Fed is targeting long run inflation to reach a benchmark of 2%.

Consumers have expressed high levels of uncertainty beginning in 2021 over long-term inflation that have not seen since 1991, the report said.

Dr. Joanne Hsu, director of the Surveys of Consumers, said: “79% of consumers expected bad times in the year ahead for business conditions, the highest since 2009.”

Posted In: consumer spendingInflationUniversity of MichiganNewsEcon #sEconomics

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.