Americans’ Attitude About the Economy Worsen for Fourth Straight Month
November 10, 2023
Americans are feeling worse about the economy amid the highest interest rates in 22 years, expectations that inflation will persist, and economic growth that is widely expected to slow.
The University of Michigan’s index of consumer sentiment fell 5% in November, according to a preliminary reading. That marks the fourth consecutive month that sentiment has worsened, after improving over the summer.
Economists at the University attributed the drop primarily to the expected impact of higher interest rates, though researchers did note that the ongoing wars in Ukraine and the Middle East weighed on many consumers as well.
Changes in how consumers view the economy varied greatly across age and income spectrum. Sentiment among young and lower-income Americans declined the most, while sentiment among the top third of earners jumped 10%, likely reflecting the recent upturn in the equity markets, the researchers noted.
Meanwhile, Americans across the board were more worried about inflation in both the short and long term. Americans’ expectations for inflation rates in the year ahead rose to 4.4% in November, up from 4.2% in October. That is a marked increase from September’s 3.2% and is the highest reading since November 2022.
In a potentially worrying sign for the Federal Reserve, Americans’ long-term inflation expectations rose to 3.2% in November, the highest level since 2011. Inflation expectations can become something of a self-fulfilling prophecy, as workers who believe prices will continue to climb are more likely to push for higher wages, which raises labor costs and further drives inflationary pressure.