Consumer confidence sinks to 8-month lows due to record cost of living

Lower inflation growth means that living costs are still rising, and Americans are feeling the pinch...
By Sam Bourgi
•
15 July 2024
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Much to economists' surprise, Americans are growing more pessimistic even as inflation cools down.

In July, the University of Michigan’s consumer sentiment index fell to 66 from the previous month's 68.2. The reading came in lower than the expected 68.5 improvement.

The survey results point to America's increasing frustration with record costs of living, which is a result of cumulative price increases since the pandemic.

“Despite expecting inflation to ease, consumers remain vociferously frustrated at the persistence of high prices,” said survey director Joanne Hsu.

“Almost half of consumers spontaneously expressed complaints that high prices are eroding their living standards, matching the all-time high reached two years ago.”

Survey respondents said they were unwilling to spend on durable goods, such as electronics, home appliances, and furniture—a key indicator of consumer spending.

The University of Michigan survey shows that falling inflation isn't much help for Americans who are grappling with already record costs that have been growing since Covid.

Inflation pain is here to stay

The cost of living remains consumers’ biggest pain point, according to several studies.

According to a Gallup poll, Americans named inflation as their biggest financial burden for the third consecutive year in 2024. Inflation was an issue for 41% of respondents, higher than at any point in the survey’s history.

By comparison, inflation was a worry for only 18% of Americans during the 2008 financial crisis. Only 3% were worried about inflation in 2020.

A separate Pew Research study found that 62% of the public viewed inflation as a “very big problem” for the country.

According to the Fed’s annual household survey, nearly two-thirds of adults said higher prices “made their financial situation worse,” including 19% who said higher costs made their financial situation “much worse.”

In theory, inflation forces consumers to cut back on spending or substitute their regular purchases with cheaper alternatives.

That’s exactly what TransUnion found in its second-quarter spending report, which showed that 55% of Americans cut back on their discretionary spending between April and June.

The 2020s iw shaping up to be one of America's most inflationary decades.

Data from the Bureau of Labor Statistics shows that consumer prices have risen by 20.8% since February 2020. By comparison, inflation rose 18.9% throughout the entire 2010s and was up 28.4% in the 2000s.

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