By Chris Matthews
The numbers :The University of Michigan’s gauge of consumer sentiment fell to a final January reading of 67.2 , down from an initial reading of 68.8, and well below December’s number of 70.6. Friday’s figure represents the lowest level of consumer sentiment since November of 2011.
Economists were expecting a reading of 68.5, according to a Wall Street Journal poll.
Key details : Expectations for inflation over the next year were 4.9% from December’s expectation of 4.8% , while inflation expectations over five years rose to a ten-year high of 3.1%.
A gauge of consumer’s views of current conditions fell to 72 in January from 74.2 in November, while an indicator of expectations fell to 64.1 from 68.3 in the previous month.
Big picture : Despite rapid job growth, consumers — especially those at the lower end of the income spectrum — feel that they are falling further behind as the result of persistently high inflation.
What UMich said : Richard Curtin, the survey’s chief economist said that the continued slump in confidence was triggered at first by the delta and omicron waves of the COVID virus, but that the inflationary effects of the virus and mitigation efforts “have become independent forces shaping sentiment.”
“While supply chains and essential workers have sparked the initial increases in prices and wages, a wage-price spiral that has subsequently developed is no longer tied to those precipitating conditions,” he added. “Household spending had been supported by an extraordinary pace of rising home and stock prices that is likely to turn negative in the year ahead. Overall confidence in government economic policies is at its lowest level since 2014, and the major geopolitical risks may add to the pandemic active confrontations with other countries.”
Market reaction : stocks were trending lower Friday morning, with the S&P 500 index (S&P:SPX) and the Dow Jones Industrial Average (DOW:DJIA) both losing ground.