Americans’ attitudes toward the economy have deteriorated for the fourth month in a row

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A person shops at a grocery store on September 12, 2023 in Los Angeles, California.

Washington, D.C
CNN
—

Americans are taking an increasingly bleak view of the economy as interest rates are at a 22-year high and economical Growth is widely expected to slow.

University of Michigan consumer sentiment fell 5% in November, according to a preliminary reading released Friday. This was the fourth consecutive month that sentiment deteriorated after improving over the summer.

The decline was primarily due to the expected impact of higher interest rates.

“The ongoing wars in Gaza and Ukraine also weighed on many consumers,” Joanne Hsu, the university’s director of consumer surveys, said in a news release.

The changes in consumer sentiment varied widely. Sentiment among young and low-income U.S. consumers fell the most at the start of the month, while sentiment among “the top third of shareholders improved by 10%, reflecting recent strengthening in equity markets,” the release said.

Meanwhile, both short-term and long-term inflation expectations worsened this month. Americans’ expectations for inflation rates in the coming year rose to 4.4% in November, compared to 4.2% in October. This is a significant increase from September’s 3.2% and the highest since November 2022.

In a worrying sign for the Federal Reserve, long-term inflation expectations rose to 3.2% this month, the highest level since 2011. The Fed is focusing intensely on Americans’ perceptions of inflation. If people simply accept higher prices as the new normal, it could make the central bank’s job of containing inflation extremely difficult.

The Fed wants demand to slow

Fed Chairman Jerome Powell gave financial markets a reality check on Thursday when he said it was still not certain whether inflation was on track to slow to the central bank’s 2% target.

“We know that further progress toward our 2 percent target is not assured: inflation has given us some misconceptions,” Powell said at a conference hosted by the International Monetary Fund in Washington. “If it is appropriate to further tighten the policy, we will not hesitate to do so.”

Stocks fell after Powell’s comments, ending the S&P 500 index’s longest winning streak since November 2021, while Treasury yields soared. Stock prices rose again on Friday morning.

This story is evolving and will be updated.