US Consumer Sentiment Hits Worst Level Since 2011 As Inflation Throttles - UMich Survey

US consumer sentiment has hit the lowest point since 2011 as inflation from a combination of soaring wages and supply disruptions throttle an economy rebounding from the coronavirus pandemic, the University of Michigan said on Friday about its closely-followed survey on consumers

WASHINGTON (UrduPoint News / Sputnik - 11th February, 2022) US consumer sentiment has hit the lowest point since 2011 as inflation from a combination of soaring wages and supply disruptions throttle an economy rebounding from the coronavirus pandemic, the University of Michigan said on Friday about its closely-followed survey on consumers.

"Sentiment continued its downward descent, reaching its worst level in a decade, falling a stunning 8.2% from last month and 19.7% from last February," the university said about the UMich Consumer Sentiment Index, which showed a reading of 61.7 for early February, down from 67.2 from January and 76.8 a year ago.

The US economy grew by 5.7 percent in 2021, the fastest rate since 1984, from a 3.5% contraction in 2020 caused by the coronavirus pandemic measures. But inflation grew even faster, with the Consumer Price Index expanding 7.5%, its most since 1982.

Wages grew by 4.7% last year. Meanwhile, the federal government, its multiple agencies and the 50 US states combined spent trillions of Dollars on pandemic-related aid that pumped up the economy from the pandemic's lows, sending prices of goods and services soaring.

The overwhelming rise in price pressures has weighed heavily on consumer spending, which accounts for about 70% of US gross domestic product.

As a result, most economists have resigned to seeing a lower trajectory for the UMich Consumer Sentiment Index, though the pace of its decline surprised some.

"The speed of the drop in (consumer) expectations is somewhat concerning,"economist Adam Button said on the ForexLive financial media platform.

Richard Curtin, chief economist of UMich's consumer surveys, said the decline of the index was among households with incomes of $100,000 or more - a vital demographic of the middle class that had at least some of its wealth invested in the stock market for short-term gain or long-term retirement.

"The impact of higher inflation on personal finances was spontaneously cited by one-third of all consumers, with nearly half of all consumers expecting declines in their inflation adjusted incomes during the year ahead," Curtin said. "In addition, fewer households cited rising net household wealth since the pandemic low in May 2020, largely due to the falling likelihood of stock price increases in 2022."

US stock markets experienced a multi-year bull run that heightened during the pandemic as many Americans flush with cash from government stimulus programs invested in stocks. But worries about impending interest rate hikes by the Federal Reserve seem to have brought to an end the long-running rally, with the S&P 500 index for top US stocks declining 6% for the year after a 27% gain in 2020.

The Federal Reserve has said that a series of rate hikes will be needed this year and possibly next year to bring inflation back to its target of 2% per year.