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Americans’ feelings about the economy slumped further in June after falling sharply the month before amid concerns over skyrocketing inflation, according to a survey released Tuesday. Online News
Amid the fastest increase in US consumer prices in more than four decades, made worse by the war in Ukraine, the consumer confidence index fell to 98.7 from 103.2, its lowest level since February 2021, according to The Conference Board’s monthly survey.
Consumers flush with savings and government aid money have been a key driver of the recovery of the world’s largest economy, spending freely on big-ticket purchases like homes, cars and appliances.
But supply chain snarls, made worse by Covid-19 lockdowns in China, meant demand has outstripped supply, and that dynamic has fueled inflation.
Feelings about the present situation dipped slightly, expectations for income and business in the next six months dropped sharply to 66.4 from 73.7, the lowest level since March 2013, the report said.
Lynn Franco, the institution’s senior director of economic indicators, said inflation is weighing heavily on Americans’ perception of the economy.
“Consumers’ grimmer outlook was driven by increasing concerns about inflation, in particular rising gas and food prices,” she said in a statement.
“Expectations have now fallen well below a reading of 80, suggesting weaker growth in the second half of 2022 as well as growing risk of recession by yearend.”
The drop underscores concerns about the economy after another closely-watched measure, the University of Michigan consumer sentiment index, fell to a record low.
The Federal Reserve, which has launched an aggressive cycle of interest rate increases to tamp down inflation by cooling demand, is looking at the surveys to gauge expectations about inflation in the longer term as fears about a possible downturn increase.
Dana Peterson, The Conference Board’s chief economist, warned the United States will likely see a recession in late 2022.
“We are anticipating a brief yet shallow recession starting in the fourth quarter of this year and extending into the first quarter of next year,” she said during a Politico event.
The Conference Board survey also measures spending plans in the next six months, and intentions to buy high-dollar items such as homes and cars held relatively steady compared to May.
Vacation plans, however, softened further as prices continue to rise, Franco noted.
Mahir Rasheed of Oxford Economics also said that consumers’ growing pessimism could increase the risk the world’s largest economy will suffer a downturn.
“Consumers’ increased pessimism points towards rising recession risks in the latter part of the year,” he said.
“While we see strong economic fundamentals preventing the US economy from slipping into recession this year, continued deterioration in household confidence may cascade into weaker-than-expected consumer spending that could stall the expansion.”
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