By Alicia Wallace, CNN Business
Minneapolis (CNN Business) – Heading into the all-important holiday shopping season, American consumers still aren’t feeling very confident about the state of the US economy.
The University of Michigan’s consumer sentiment index landed at 56.8 in November, up from the preliminary reading of 54.7 measured earlier this month but lower than the 59.9 recorded in October.
Economists were expecting a reading of 55, according to consensus estimates on Refinitiv.
The month-over-month decline in sentiment offset about one-third of the gains made since the index bottomed out in June, according to Joanne Hsu, director of the university’s Surveys of Consumers.
“Headwinds to consumer strength have started to emerge. Strong incomes have thus far helped consumers, particularly lower-wage workers, cope with high inflation,” Hsu said in a statement. “However, their perceptions of weakening labor markets could make them pull back their spending in the future. Wealthier households are experiencing declining stock markets and home values, which would also produce drag on their willingness to spend.”
Consumers surveyed also highlighted the effects of rising interest rates on their desire to buy homes, cars and other big-ticket items. The Federal Reserve, in efforts to combat decades-high inflation, has enacted a series of steep interest rate hikes.
About 83% of respondents to the University of Michigan’s Surveys of Consumers said that it was a bad time to buy a home. That’s the highest share ever recorded, according to the university.
The survey also showed that consumers’ inflation expectations for this year and five years out remained relatively unchanged at 4.9% and 3%, respectively. This is a key data point for the Federal Reserve. If consumers believe prices will remain high, that could factor into increased wage demands, which could cause businesses to raise prices.
Earlier this month, when the preliminary survey data was released, Hsu noted that very few consumers were front-loading purchases to avoid higher interest rates in the future. That was an indication that expectations aren’t worsening, she stated at the time.
Still, Hsu noted Wednesday, uncertainty over these expectations remains at an elevated level, “indicating that the general stability of these expectations may not necessarily endure.”