Concerns over inflation crept into consumer confidence in November, pushing the index from the University of Michigan to a decade low of 66.8 from 71.7 in October, according to data released on Friday.
Behind the decline was the rise in gasoline prices, which have long had a significant effect in overall consumer confidence. Gas prices accounted for about a third of the year-over-year inflation reading of 6.2% released on Wednesday.
The subindex for gasoline price expectation, as a result, spiked to 31.9 on the month from 22.0 in October.
Inflation concerns also brought down consumers’ sentiment over the current condition of the economy and their expectations, which both registered pandemic lows in November.
The more closely watched subindexes from the report were expectations for inflation one year from now, and in five to 10 years.
While consumers expect inflation to increase by 1 percentage point to 4.9% in the next 12 months, their expectation for longer-term inflation in the next five to 10 years remains at 2.9%.
Both subindexes will feed into the Federal Reserve’s calculation for inflation expectation, which often has major implications for any change in monetary policies.
Beneath the headline figure, consumers’ buying intentions for major household items, vehicles or houses all declined sharply on the month. While high prices continue to be the major contributor, this also indicates the shift from spending on goods toward services in recent months.
On the bright side, such a shift in spending will help lessen the pressure on goods prices and housing prices that account for most of the gains in inflation.