The University of Michigan Consumer Sentiment Index rose slightly to 71.0 in September, following a nine-year low of 70.3 in August as consumers felt the impact of the delta variant and rising prices.
The University of Michigan Consumer Sentiment Index signaled a view that consumers see inflation as transitory.
The report, released on Friday, signals a temporary shift in spending as consumers delay purchases of homes and big-ticket items like vehicles and appliances as they wait for prices to decline.
Only 29% of respondents said it was a good time to buy a house and a vehicle, which is down 4 and 3 percentage points from July, respectively. Just under two-fifths, or 38%, of those surveyed said it was a good time to buy a major household item, a 7-percentage point decrease month-over-month.
These reactions suggest that consumers view inflation as transitory as they wait out this period of spending in the expectation that long-term inflation will go down. This view is indicated by little to no change in the one-year and in the five to 10-year inflation expectations that are well anchored at 4.7% and 2.9%, respectively.
It is important to note that both long-term inflation expectation indicators are used in the Federal Reserve’s calculation for the Common Inflation Expectation Index, which has come to the forefront of inflation discussions in recent months.
Beneath the headline number, the index for the timing of selling a house dropped to 158 following the record of 168 in August, pointing to a housing market that has continued to decelerate as a preview of next week’s data on housing.
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