American consumers are less optimistic about the economy and are increasingly worried about accelerating price increases, which makes their prospects for recovery bleak.
The University of Michigan Consumer Confidence Index fell to 80.8 from 85.5 last month. Data released earlier on Friday showed that, driven by strong demand from electronic stores and clothing stores, retail sales rebounded in June. And restaurants.
Richard Curtin, the chief economist of the university’s consumer survey, said: “Now, stopping and reversing the accelerating inflation rate is not job creation, but the most worrying issue.”
Shoppers face “Sticker vibration“A range of commodities from chicken to used cars. Consumer Price Index Skipped June increased by 5.4% year-on-year, a 13-year high, and increased by 5% the previous month. Wholesale prices have also risen, heralding an increase in costs for consumers. The producer price index rose by 7.3% last month, the largest annual increase since at least 2010.
Fed officials insisted that the inflation spike will be a short-term forecast, but some lawmakers believe that the central bank and the Biden administration have underestimated the risk of inflation to economic recovery.
In a congressional hearing this week, Federal Reserve Chairman Jay Powell Postpone Oppose the central bank’s complacency proposal and assure lawmakers that if inflation exceeds expectations, it will be ready to respond.
“I know people are very worried about inflation,” Powell said. “We heard a loud voice from everyone… It really runs through the entire economy and every business.”
The consumer confidence survey found that complaints related to rising prices of houses, vehicles and durable goods hit a record high, pushing the index to its lowest level since the end of February.
Respondents estimated that the inflation rate for the coming year was 4.8%, the highest expected since August 2008, compared with 4.2% in June.
“Inflation has put greater pressure on living standards, especially for low- and middle-income families, and has caused a large number of discretionary purchases to be postponed, especially in high-income families,” Curtin said.
Economists are watching sales trends closely to determine whether consumers are eager to buy goods now to seize opportunities before future price increases, or use their cash to accumulate savings or pay off debts.
According to a Reuters survey of economists, data released by the U.S. Census Bureau on Friday showed that retail sales increased by 0.6% from the previous month, which was lower than the expected drop of 0.4%.
After a surge in shopping activity earlier this year, retail spending has slowed in recent months. In May, due to the weakening of the boost from federal stimulus checks, sales fell by 1.7%.
Capital Macros’ chief US economist Paul Ashworth warned that inflation may “mask” the weakness in actual sales activity.
Despite this, consumers still show willingness to spend and demand for goods is strong, and since Covid-19 restrictions have been lifted in almost every corner of the United States, many people have been booking hotel rooms and tickets for sports events. Retail sales data does not cover service expenditures such as travel and accommodation.
James Knightley, chief international economist at ING, said: “Although the reopening of the economy provides a wider range of options, such as leisure and hospitality, the strong retail sales in the US in June shows that consumer interest in physical consumption has not diminished.”
Last month, the National Retail Federation raised its forecast for this year’s sales, which is expected to grow at an annual rate of 10.5% to 13.5% in 2020. Previously it was expected to increase by 6.5%.
The June retail sales report showed that food services, including restaurants and bars, continued to recover, with an increase of 2.3% from the previous month. Sales of electronics and electrical appliances, groceries, gas stations, department stores and pharmacies also increased. Sales at car dealers, furniture stores, and home and garden centers fell.
Excluding fuel, retail sales rose 0.4% from May, after falling by 1.9% last month.