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Debt ceiling standoff pushes consumer sentiment lower (U. of Michigan Consumer Sentiment)
Debt ceiling standoff pushes consumer sentiment lower, 5/12/23
Data from the University of Michigan out Friday morning showed its consumer sentiment index dropped nearly 6 points from April to May as the debt ceiling fight weighed on the economic outlook held by many Americans. The preliminary read for the index in May came in at 57.7, down from the 63.5 that prevailed in April's final numbers.
Perhaps more notable for investors in this report, however, was the increase in long-term inflation expectations, which rose to 3.2% in May to reach the highest reading since 2011.
"Consumer sentiment tumbled 9% amid renewed concerns about the trajectory of the economy, erasing over half of the gains achieved after the all-time historic low from last June," said Joanne Hsu, director for the survey of consumers. "While current incoming macroeconomic data show no sign of recession, consumers' worries about the economy escalated in May alongside the proliferation of negative news about the economy, including the debt crisis standoff."
Hsu added: "Throughout the current inflationary episode, consumers have shown resilience under strong labor markets, but their anticipation of a recession will lead them to pull back when signs of weakness emerge. If policymakers fail to resolve the debt ceiling crisis, these dismal views over the economy will exacerbate the dire economic consequences of default."
Data from the University of Michigan out Friday morning showed its consumer sentiment index dropped nearly 6 points from April to May as the debt ceiling fight weighed on the economic outlook held by many Americans. The preliminary read for the index in May came in at 57.7, down from the 63.5 that prevailed in April's final numbers.
Perhaps more notable for investors in this report, however, was the increase in long-term inflation expectations, which rose to 3.2% in May to reach the highest reading since 2011.
"Consumer sentiment tumbled 9% amid renewed concerns about the trajectory of the economy, erasing over half of the gains achieved after the all-time historic low from last June," said Joanne Hsu, director for the survey of consumers. "While current incoming macroeconomic data show no sign of recession, consumers' worries about the economy escalated in May alongside the proliferation of negative news about the economy, including the debt crisis standoff."
Hsu added: "Throughout the current inflationary episode, consumers have shown resilience under strong labor markets, but their anticipation of a recession will lead them to pull back when signs of weakness emerge. If policymakers fail to resolve the debt ceiling crisis, these dismal views over the economy will exacerbate the dire economic consequences of default."
Source: go to this link and scroll down 2 or 3 headings (the article is a compilation of items affecting the markets today):
https://finance.yahoo.com/news/stocks-forfeit-gains-after-sentiment-inflation-data-stock-market-news-today-152735077.html
Edited to add Link to the U of Mich. Consumer Sentiment report
http://www.sca.isr.umich.edu/
Year-ahead inflation expectations receded slightly to 4.5% in May after spiking to 4.6% in April.
After two years of relative stability, long-run inflation expectations rose to their highest reading since 2011, lifting from 3.0% last month to 3.2% this month.
After two years of relative stability, long-run inflation expectations rose to their highest reading since 2011, lifting from 3.0% last month to 3.2% this month.
Graph: Expected changes in prices during the next year: http://www.sca.isr.umich.edu/files/chpx1r.pdf
Graph: Expected changes in prices during the next 5 years: http://www.sca.isr.umich.edu/files/chpx5r.pdf
I was surprised to read that long-run (5 years ahead) inflation expectations upticked, and are at their highest level since 2011, so I included the above information, but I still haven't found an explanation as to why.