US consumer sentiment drops again on inflation fears

Inflation may be decreasing in the U.S., but Americans expect it to surge again, according to fresh data.

The University of Michigan’s latest consumer survey released Wednesday found consumer sentiment fell for the fourth month in a row in November, while households’ inflation expectations climbed for the second straight reading.

According to the findings, consumers see inflation accelerating to 4.5% over the next year, up from 4.2% in October and 3.2% in September. 

Over a five-year horizon, consumers now see inflation running at 3.2% on average, up from 3.0% in October and 2.8% in September. That is the highest since a matching reading of 3.2% in 2011. Households’ long-term inflation outlook has not been higher than that since 2008, when it reached 3.4% as the financial crisis was beginning to unfold.

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“These expectations have risen in spite of the fact that consumers have taken note of the continued slowdown in inflation,” Joanne Hsu, director of the survey, said in a statement. “Consumers appear worried that the softening of inflation could reverse in the months and years ahead.”

The Labor Department reported last week that the consumer price index, a broad measure of the price of everyday goods including gasoline, groceries and rents, was unchanged in October from the previous month. Prices climbed 3.2% on an annual basis. 

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But when compared with January 2021, shortly before the inflation crisis began, prices remain up a stunning 17.62%. 

Inflation has created severe financial pressures for most U.S. households, which are forced to pay more for everyday necessities like food and rent. The burden is disproportionately borne by low-income Americans, whose already-stretched paychecks are heavily impacted by price fluctuations.

FOX Business’ Megan Henney and Reuters contributed to this report.