Consumer Sentiment Down 6.5% in Feb. to 62.8, Lowest Level in a Decade
Ann Arbor, MI, February 25, 2022-Consumer sentiment slid 6.5% in February to 62.8, according to final results from the University of Michigan Survey of Consumers.
This represents an 18.2% decline year over year.
“Although Consumer Sentiment posted a slight increase in the last half of February, it still remained at its lowest level in the past decade, and the loss was still entirely due to a 12.9% decline among households with incomes of $100,000 or more,” says Survey of Consumers chief economic Richard Curtin. “The February descent resulted from inflationary declines in personal finances, a near universal awareness of rising interest rates, falling confidence in the government's economic policies, and the most negative long term prospects for the economy in the past decade. Virtually all interviews were conducted prior to the Russian invasion so its impact is yet to be felt by consumers. The most likely linkage to the domestic economy is through rising energy prices, with the size and length of the potential increases subject to substantial uncertainty. This will complicate the Fed's policy actions, tilting their objectives to focus more on inflation at the cost of slower growth and higher unemployment. The financial harm and growing angst among consumers about rising inflation have pushed nearly nine-in-ten consumers to anticipate interest rate hikes. The Fed's clinging to the transient hypothesis meant missed opportunities to nip inflation at its earliest stages; aggressive actions are now needed to avoid the potential establishment of an inflationary psychology that acts to form a self-fulfilling prophecy. The imposition of sanctions against Russia is likely to generate counter measures that could harm the domestic economy, requiring the Fed to give special consideration to any associated economic slowdown and rising unemployment. Presumably, economic sanctions would be lifted only if Ukraine's sovereignty is maintained, but not if Russia prevails. Consumers may double-down on precautionary behaviors if the greater cyber risks associated with the conflict are now borne by domestic households.”