An 11-year-high satisfaction rate with the state of the U.S. economy is doing little to keep the U.S. consumer happy.
Signs of waning confidence are beginning to show with consumer sentiment falling from 94.7 points observed in May to 94.3 in June on an index maintained by the University of Michigan, The Wall Street Journal reported.
“Consumers rated their current financial situation at the best levels since” the last decade’s economic expansion, “largely due to wage gains,” said Richard Curtin, chief economist of the survey. “On the negative side of the ledger, consumers do not think the economy is as strong as it was last year, nor do they anticipate the economy will enjoy the same financial health in the year ahead as they anticipated a year ago.”
The drop in consumer sentiment comes against a slowing job market. While, at 4.7 percent, the U.S. economy showed a dramatic drop in the unemployment rate, it only added 38,000 new jobs in May — the lowest since Sept. 2010, according to the Bureau of Labor Statistics.
“The stability in consumer sentiment supports the view that the slowdown in May job growth was not a reflection of a broad-based downturn across the economy,” Barclays economist Jesse Hurwitz said. “Should job growth bounce back, as we expect it will, sentiment and spending should be key beneficiaries.”
The report also highlighted a drop in expectations to see inflation affect the economy in the near future. While the inflation predicted in the coming year stood unchanged at 2.4 percent as compared to May, the expected inflation over the next five years is now at an all-time low at 2.3 percent, which is down from 2.5 percent noted a couple months ago, according to WSJ.
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Feds have reportedly indicated that they want to see stable expectations, which will further boost their confidence in price growth strengthening in coming months and years.
“If inflation expectations really are moving lower, that could call into question whether inflation will move back to 2 percent as quickly as I expect,” said Fed Chair Janet Yellen.
For now, the Fed is predicted to stick to its interest rates for short-term loans. However, if the rates will remain unchanged into late July or September is yet to be seen.
