Inflation continues to limit consumer sentiment

Consumer sentiment remained muted this month as high prices continued to limit spending power, according to the University of Michigan Surveys of Consumers..The index of consumer sentiment fell 5 percent from May to 65.6 from 69.1, which is still a 2.2 percent increase on an annualized basis. The index of current economic conditions fell 10.2 percent to 62.5 from 69.6, which was 9.3 percent lower than June 2023. The index of consumer expectations fell 1.7 percent from May to 67.6 from 68.8 but was 10.6 percent higher than 61.1 in June 2023..Year-ahead inflation expectations were at 3.3 percent this month, which is still above the 2.3 percent to 3 percent range in the two years before the pandemic. Long-term inflation expectations were basically unchanged from May at 3.1 percent. "Long-run inflation expectations have been remarkably stable over the last three years but remain elevated relative to the 2.2-2.6 percent range seen in the two years pre-pandemic," noted Surveys of Consumers Director Joanne Hsu. .Consumer sentiments improved in May following three straight months of declines, according to The Conference Board Consumer Confidence Index. The index increased to 102.0 from 97.5 in April, while the index based on consumers' assessments of current business and labor market conditions increased to 143.1 from 140.6 in April. The index based on consumers' short-term outlooks for income, business and labor conditions increased to 74.6 from 68.8 in April, which still signals a coming recession. ."The strong labor market continued to bolster consumers' overall assessment of the present situation," said The Conference Board Chief Economist Dana Peterson. "Views of current labor market conditions improved in May, as fewer respondents said jobs were 'hard to get', which outweighed a slight decline in the number who said jobs were 'plentiful.'"