Yes, but: Consumers are spending nonetheless. Retail sales unexpectedly grew strongly in June during a month when consumer prices rose by more than expected.
By the numbers: The University of Michigan’s widely followed consumer sentiment index unexpectedly tumbled to 80.8 in July from 85.5 in June.
- Consumers have increasingly said they are worried about what inflation may look like one year and five years from now.
- The report also found that consumers have never been more frustrated by the rising prices of homes, cars and durable goods like home appliances.
- For these categories, a net 33% of consumers said it was a bad time to buy because prices were too high. This is an all-time record according to data going back to 1960.
- The report found 71% of consumers thought it was a bad time to buy a home because prices were too high, while just 6% thought it was a good time to buy because prices were low.
What they’re saying: “Consumers' complaints about rising prices on homes, vehicles, and household durables has reached an all-time record,” Richard Curtin, the survey's chief economist, said in a statement.
- “Purchase rates, however, have benefitted from record increases in accumulated savings and reserve funds.”
- Indeed, some estimate that consumers accumulated $2.4 trillion in excess savings since the onset of the COVID-19 pandemic, suggesting that the consumers' pump is primed.
What to watch: Recent housing market data suggest sales volumes are about to turn up again, even as home prices continue to surge.
The bottom line: While higher prices will continue to have consumers incensed, hard spending data like retail sales confirm that they have the ability and willingness to make purchases anyway.
