FX.co ★ U.S. Consumer Sentiment Drops More Than Expected, Inflation Expectations Rise

Consumer sentiment in the US fell more significantly than anticipated in April, according to preliminary data from the University of Michigan that was released last Friday.

The University reported that its consumer sentiment index dropped to 77.9 in April, compared to 79.4 in March. The index was expected to only slightly decrease to 79.0.

The unexpected decline was all due to consumers showing a significant drop in their assessment of the current economic conditions. This was represented in the current economic conditions index, which fell to 79.3 in April from 82.5 in March.

The index which measures consumer expectations demonstrated a minor decrease, falling to 77.0 in April, down from 77.4 in March.

The report also highlighted that inflation expectations for the year ahead rose to 3.1% in April, a slight increase from 2.9% in March. This shift took the climb just above the 2.3-3.0% range observed in the two years before the Covid-19 pandemic hit.

Expectations for long-term inflation also experienced a rise, increasing to 3.0% in April from 2.8% in March. This was according to data from the University of Michigan.

Joanne Hsu, the Director of Surveys of Consumers, suggested the mild increase in inflation expectations perhaps indicated a sense of disappointment among many that the slowdown in inflation seemed to have reached a pause.

Hsu concluded by saying that consumers remained uncertain about economic conditions due to the upcoming elections. Many consumers believed the election results could significantly change the direction of the economy.