The Index of Consumer Sentiment dropped for the fourth month in a row as Americans’ long-term outlook on inflation remains uncertain.
The index fell to 61.3 in November from 63.8 in October, a decrease of 2.5 index points, or about 4%, according to the latest results from the University of Michigan’s Surveys of Consumers. Although consumer sentiment is down 3.9% month over month, the index is up 8.1% over the last year.
“While this marks the fourth consecutive month of declines, November’s reading reflects a balance of factors, some of which improved while others worsened,” said Surveys of Consumers director Joanne Hsu in the report.
The Index on Current Economic Conditions was also down during the month, falling from 70.6 points in October to 68.3 in November, a 3.3% decrease, per the report. Similar to how sentiment improved over the last year, the outlook on current economic conditions also saw a sharp 16.4% increase over the past 12 months.
Meanwhile, the Index for Consumer Expectations had the biggest month-over-month decrease. Overall, the index fell from 59.3 in October to 56.8 in November, a 4.3% decrease month over month but a 2.3% increase year over year.
“More favorable current assessments and expectations of personal finances were offset by a notable deterioration in expected business conditions. In particular, long-run business conditions plunged by 15% to its lowest since July 2022,” Hsu said.
She continued, “Younger and middle-aged consumers exhibited strong declines in economic attitudes this month, while the sentiment of those age 55 and older improved from October.”
The reason consumers’ attitudes toward inflation matter is because inflation depends, in part, on what Americans expect it to be. If consumers expect prices to jump 3% percent over the next 12 months, businesses tend to respond accordingly.
Year-ahead inflation expectations jumped to 4.5% in November, up from 4.2% the month prior, reaching the highest reading since April 2023, according to the report.
Additionally, long-run inflation expectations rose from 3.0% last month to 3.2% this month, a reading last seen in 2011.
“These expectations have risen in spite of the fact that consumers have taken note of the continued slowdown in inflation; consumers appear worried that the softening of inflation could reverse in the months and years ahead,” said Hsu.