According to a survey by the University of Michigan, consumer confidence has increased slightly.
The final results for the September consumer sentiment index show a 0.7% month-on-month increase, while the consumer expectations index for the month is unchanged.
The projected rise in consumer confidence can largely be attributed to the decline in the energy index, which has fallen 9.6% over the past two months, with gasoline falling 10.6% in August.
Unfortunately, food inflation continued to rise. Home groceries inflation is up 13.5% and out-of-home groceries is up 8% in the 12 months to the end of August.
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As inflation moderated in July and August, durable goods purchasing conditions and the one-year economic outlook continued to rise from the lows of early summer, but these gains were largely offset by a slight decline in the long-term business condition outlook, commented Surveys of Consumers Director, Joanne Hsu.
Why it matters: With consumer sentiment returning to levels not seen since 2012, it is clear that high inflationary pressures on food and energy have dramatically weakened consumer attitudes towards spending power.
Surprisingly, consumer expectations for the current state of the economy rose 1.9% month-on-month as the preliminary estimate had only called for a 0.5% increase.
A plausible explanation for this could be that the median expected inflation rate for the coming year has fallen to 4.7%, the lowest reading since last September.
See also: The Fed’s preferred measure of inflation is higher than expected: what you need to know
With the Fed aggressively raising interest rates to curb inflation, consumers are already seeing slacking demand in the housing market in recent months.
If the housing market slows, it will affect more sectors of the economy than most would expect, particularly prices for commodities like lumber, which are based on…
