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Fears of a stock market crash are rising again after a surprisingly pessimistic June consumer sentiment report. Indeed, a University of Michigan survey of consumers released today showed U.S. consumer sentiment fell to 65.6 in June, down from 69.1 in May and the lowest in seven months.
Despite relatively encouraging recent economic data, persistent inflation continues to weigh on consumers.
“Slightly more concern about rising prices and lower incomes led to lower ratings of personal financial situations,” said Joan Hsu, director of the Bureau of Consumer Research. “Overall, consumers see little change in the economy from May.”
Interest rates and inflation have both been higher than desirable over the past year, unemployment is starting to rise but only slightly so far, and it appears that many Americans are beginning to feel increasing macroeconomic pressures.
“The press release noted that consumers remain concerned about high prices, with one-year-out inflation expectations remaining at 3.3%,” said Olivia Cross, an economist at Capital Economics. “This is at odds with price movements in staples, given that gasoline prices have fallen and we saw this week that the CPI Food at Home index was unchanged for May.”
Today’s consumer sentiment report comes on the heels of a surprisingly muted Consumer Price Index (CPI) inflation report for May, released on Wednesday. In fact, headline inflation rose 3.3% year-on-year last month, the lowest CPI reading since July 2022.
The Producer Price Index (PPI), released this week, also came in below expectations. Wholesale price increases tend to be passed on to consumers, so a declining PPI report could be a good indicator of upcoming de-inflation.
Declining consumer confidence fuels stock market crash and recession fears
The decline in consumer confidence has led to a widening disconnect between economic data and how Americans actually feel about the economy.
On paper, the economy looks to be thriving. Spending is strong again this year, the labor market remains robust, and inflation is one-third what it was just two years ago (though still higher than desirable). The stock market has also performed well this year. S&P 500 It’s up nearly 14.5% just six months into this year.
Nonetheless, many Americans are expressing dissatisfaction with the economy.
“People go through what they go through,” Federal Reserve Governor Jerome Powell said earlier this week. “All I can say is what the data shows, which is that the economy is growing at a solid pace. The unemployment rate is at 4 percent, the labor market is doing very well. You know, it’s been a long time since we’ve had unemployment below 4 percent for an extended period of time. A very long time.”
It’s unclear what’s causing this dissonance, but it’s having a very real impact on consumers.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author in accordance with InvestorPlace.com’s Publishing Guidelines..
