Americans feel slightly better about the economy, but inflation is still biting

Americans feel slightly better about the economy, but inflation is still biting

Americans are feeling slightly better about the economy, but painfully high inflation is still keeping consumer confidence near an all-time low, according to preliminary research data released Friday by the University of Michigan.

The university's preliminary consumer survey index rose to 51.1 in July from an all-time low of 50 in June."The percentage of consumers who blame inflation for eroding their standard of living continued to rise to 49%, matching the record achieved during the Great Recession," Joanne Hsu, director of Surveys of Consumers, said in a statement. . "These negative views have persisted despite the recent moderation in gas prices at the pump."

The survey also found that long-term inflation expectations continue to improve. Median expectations for five-year inflation levels fell to 2.8%, falling below the 2.9% to 3.1% margin observed over the past 11 months. Consumer confidence data follows the release of new retail sales data, which showed a slight drop in spending as Americans battle high prices for everything from cookies to clothes. Economists and policymakers are closely watching a substantial drop in US consumer spending, which drives nearly two-thirds of the economy.

Retail sales rose 1% to $ 680.6 billion in June from May and increased 8.4% from June 2021, according to data released last Friday by the US Census Bureau.

However, since retail sales are not corrected for inflation, the higher number likely reflects higher prices rather than an increase in spending. Inflation, as measured by the consumer price index, increased by 1.3% last month and is 9.1% higher than in June last year. Some of the largest year-over-year sales gains came from gas stations, which grew 49.1%; other retailers 15.1%; and Food & Beverages, up 13.4%. Sales at electronics and appliance stores fell 9.1%, reflecting the continued trend of consumers shunning big-ticket items for service-related spending.

Friday's data will come under scrutiny from the Federal Reserve, which is trying to contain the highest inflation in 40 years without plunging the economy into recession.

While some analysts and economists previously expected the Fed to raise its benchmark interest rate another 75 basis points when it meets later this month to discuss monetary policy, a series of Strong economic data prompted markets to brace for more aggressive monetary policy action. The Fed is preparing - including a potential 100 basis point rate hike - to cool consumer demand.

Fed Governor Christopher Waller hinted he backs another 75 basis point hike during a speech Thursday at the Rockies Economic Summit. However, he said he would consider climbing even higher if retail sales and housing data turn warmer than expected.

June retail activity may be hot enough to support this huge increase, said Ted Rossman, senior industry analyst at Bankrate.

"The fact that retail sales are more or less treading on the water at a time when inflation is high and people are spending more than their discretionary dollars on trips and dining out, I think there is a possible read on that. that encourages the Fed to go big. becomes. " , "He said.

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