Consumer confidence tumbles to 11-year low as inflation skyrockets
Sentiment plunges among households with incomes of $100K or more
U.S. inflation hits 40-year high after jumping 7.5 percent in January
U.S. inflation rose 7.5 percent in January, the highest since February 1982. FOX Business Ed Lawrence with more.
U.S. consumer confidence plunged to an 11-year low in early February, reflecting heightened concerns among Americans about hotter-than-expected inflation and the skyrocketing price of everyday goods.
The University of Michigan’s consumer sentiment index fell to 61.7 in February – down sharply from the January reading of 67.2 and well below economists' forecast for a reading of 67.5.
MOST SMALL BUSINESSES SINCE 1974 ARE HIKING PRICES TO OFFSET INFLATION
"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," Richard Curtin, the survey's chief economist, said in a statement. "The recent declines have been driven by weakening personal financial prospects, largely due to rising inflation, less confidence in the government's economic policies, and the least favorable long term economic outlook in a decade."
The decline was entirely among households with incomes of $100,000 or more, with their sentiment index plunging by 16.1% in early February from the previous month.
People shop for groceries at a supermarket in Glendale, California January 12, 2022. ((Photo by ROBYN BECK/AFP via Getty Images) / AP Newsroom)
One-third of all consumers cited the impact of higher inflation on personal finances as concerning, with nearly half of all consumers expecting declines in their inflation-adjusted incomes during the year ahead, according to the survey.
The survey comes just one day after the Labor Department reported that the consumer price index rose 7.5% in January from a year ago, marking the fastest increase since February 1982, when inflation hit 7.6%. The CPI – which measures a bevy of goods ranging from gasoline and health care to groceries and rents – jumped 0.6% in the one-month period from December.
So-called core prices, which exclude more volatile measurements of food and energy, climbed 6% in January from the previous year – a sharp increase from December, when it rose 5.5%. It was the steepest 12-month increase since August 1982.
A pedestrian walks past a pre-owned car sales lot in Miami, Florida on January 12, 2022. (Photo by CHANDAN KHANNA/AFP via Getty Images / Getty Images)
Rising inflation is eating away at strong wage gains that American workers have seen in recent months: Real average hourly earnings rose just 0.1% in January from the previous month, as the 0.6% inflation increase eroded the 0.7% total wage gain, according to the Labor Department. On an annual basis, real earnings actually declined 1.7% in January.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
"Mounting inflation drove down consumer sentiment this month to 2012 levels, when Americans were still reeling from the Great Recession," said Robert Frick, corporate economist at the Navy Federal Credit Union. "But will this cool down consumer spending and crimp the recovery? That’s doubtful, given spending and sentiment diverged when government stimulus put hundreds of billions into consumers’ bank accounts and spending rose while sentiment dropped."
The survey's one-year inflation expectations, meanwhile, jumped to 5.0%, the highest level since July 2008. The five- to-10-year inflation outlook held steady at an 11-year high of 3.1%.