Surging prices, a labor shortage and a gummed-up supply chain are making Americans uneasy.
The consumer sentiment index fell to a decade low in early November data collected by the University of Michigan. The culprit: pandemic-era inflation woes and worry that no policies are in place to rein it in. Consumers had also expected the supply chain crisis and labor shortage crunch to be resolved by now.
With the holidays coming our way, Americans are bracing for higher prices as well as longer wait times for their orders. So far, rising wages, a steady labor market recovery and shored-up savings have kept people spending and the US economy going.
But the negative sentiment about the challenges to the economy outweighed many of the positive factors, including the surging job growth and growing paychecks.
“Sentiment has been shaken in recent months amid the more recent outbreak of Covid and dwindling stimulus, but the November fallout has inflation’s name written all over it,” said economists at Wells Fargo in a note.
One in four people surveyed said inflation has worsened their living standards. Despite higher paychecks, half of respondents said they expect inflation to wipe out whatever wage gains they were given over the past year.
Consumers complained about rising prices for homes, cars and other durable goods like appliances more than any point in more than 50 years, according to Richard Curtin, the University of Michigan’s Surveys of Consumers chief economist.
“Until supply and demand are able to find middle ground, the economy is in a bit of a waiting game for when the pandemic-driven price increases will finally start to ease,” the Wells Fargo economists said.
The explanation that the current price hikes are “transient” and won’t last forever — language the Federal Reserve and the Biden administration have used — suggests the American people should just sit tight and wait even though Washington’s policies have yet to resolve the problem, Curtin said.
On top of that, political affiliations affect how people are processing information about the economy.
“Partisans aligned with the President’s party have adopted very positive moods, and those in the opposing camp very negative moods,” Curtin said.
