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Consumer sentiment about the U.S. economy has ticked down but remains near a recent high, with Americans’ outlook largely unchanged this year.
The University of Michigan’s consumer sentiment index, released Friday in a preliminary version, slipped to 77.9 this month, down from March’s figure of 79.4. Sentiment is about halfway between its all-time low, reached in June 2022 when inflation peaked, and its pre-pandemic averages. The survey has been conducted since 1980.
“Consumers are reserving judgment about the economy in light of the upcoming election, which, in the view of many consumers, could have a substantial impact on the trajectory of the economy,” said Joanne Hsu, director of the consumer survey.
The index had dropped to 61.3 as recently as November before jumping in the following two months by the most in more than three decades. It has since moved mostly sideways.
Stronger consumer optimism can sometimes translate into more spending, which typically boosts the economy. Most economists expect consumer spending to remain healthy as long as the job market stays strong.
“Looking beyond the recent minor monthly volatility, sentiment remains on a rising trend,” Oren Klachkin, an economist at Nationwide, said in a research note. “It’s still a positive environment for the consumer.”
Among the respondents to the survey, sentiment fell the most among Republicans. Among independents, it edged down, and it rose slightly among Democrats. Americans’ economic views have become more driven by political partisanship in recent decades.
An increase in gas prices likely contributed to the decline in consumers’ outlook, according to Ian Shepherdson, chief economist at Pantheon Macroeconomics. The average national price of a gallon of gas has jumped about 7% from a month ago, according to AAA, to $3.63 a gallon.
Americans’ perceptions of future inflation also rose, probably reflecting still-high prices. Consumers expect inflation to be 3.1% a year from now, which would exceed the Federal Reserve’s 2% target. Still, that would be below the current level of 3.5%.
Inflation has tumbled from a peak of 9.1% in the summer of 2022 but has remained elevated so far this year. Prices excluding volatile food and energy costs, rose 3.8% in March from a year earlier, the same as in the previous month and well above the Fed’s target.