“Consumers across income, age, education, geographic region, political affiliation, stockholding and homeownership status all posted large declines,” said Joanna Hsu, Surveys of Consumers director, in a statement. “About 79% of consumers expected bad times in the year ahead for business conditions, the highest since 2009.”
Inflation remained the biggest concern for consumers, she noted, adding that 47% of consumers blamed the sharp increase in prices for eroding their living standards. That is 1 percentage point below the all-time high reached during the Great Recession, according to the report.
“As higher prices become harder to avoid, consumers may feel they have no choice but to adjust their spending patterns, whether through substitution of goods or foregoing purchases altogether,” Hsu said. “The speed and intensity at which these adjustments occur will be critical for the trajectory of the economy.”
Households are expecting prices to run even higher this year and anticipate them to remain above the Fed’s 2% target goal for the next five years, according to survey data. Consumers expect inflation to run at a rate of 5.3% during the next year and 3.1% for the next five years.
The year-ahead expections were little changed from the preliminary reading and those of the recent months, Hsu said.
Still, consumers are feeling slightly more optimistic about longer-term inflation as well as continued strength in the labor market, the survey found.
More than half of consumers surveyed said they expect to see income growth during the next year, the survey found.
During the press conference that followed the central bank’s June policymaking meeting, Federal Reserve Chairman Jerome Powell said the University of Michigan’s initial June readings — among them expectations for higher inflation for the next few years — were “eye-catching.”