Consumer Confidence, measured by the University of Michigan, dropped to the lowest level since 2011, according to preliminary data released on Friday. Against a backdrop of worsening inflation, consumers now expect their personal finances to deteriorate in the year ahead by the largest share since the survey started in the mid-1940s, explained analysts at Wells Fargo.
Key Quotes:
“Less than half of consumers are expecting higher income in the next 12 months, with 54% expecting that their income will be less than inflation in the next couple of years, a share that has been "topped in only six surveys since the mid-1970s." This likely also translated into an overall more pessimistic view for the country, the index measuring whether the country will have continuous good times over the next year fell 14 points to 52, the lowest since the fall of 2011.”
“Inflation may be the biggest problem for consumers, but it is not the only challenge. As the Fed tries to tame high prices, we expect it will raise rates six times this year. The higher cost of borrowing that will be in place by the start of 2023 could dent consumer outlays, particularly on durable goods.”
“The strong start in January sets up consumer spending for a decent first quarter, but outlays in real spending could get squeezed in the second quarter and remaining quarters of the year as consumers contend with higher prices.”
