The last time Americans were this unhappy about prices of big-ticket purchases was 1982, when the Federal Reserve was fighting a war against double-digit inflation.
The University of Michigan’s survey of consumer sentiment showed U.S. consumers more concerned with higher prices of appliances, houses, and cars than anytime in 39 years, according to the survey’s chief economist Richard Curtin.
The survey records spontaneous mentions of prices of these major purchases and subtracts comments about higher prices from comments about lower prices. The difference has plummeted this year, indicating a huge imbalance in the comments due to a much larger volume of comments on higher prices.
“Spontaneous references to market prices for homes, vehicles, and household durables fell to their worst level since the all-time record in November 1974,” Curtin said. “These unfavorable perceptions of market prices reduced overall buying attitudes for vehicles and homes to their lowest point since 1982.”
Curtin said concern over prices of these categories was especially high among the top-third of earners. These consumers are responsible for more than half of retail sales.
The price of used cars rose by 7.3 percent in May, following a 10 percent gain in April. Home prices have hit record highs. Appliance prices are up 12.3 percent from a year ago, according to the most recent report on the Consumer Price Index.
Despite the worsening of this measure, overall consumer expectations moderated in the first weeks of June. The preliminary June survey showed expectations for inflation declining a bit from May, both in the one-year forecast and the five-year forecast. Even with the decline, however, expectations for the next year remain at their highest point in a decade.
Consumer sentiment improved in early June, the survey showed. The index rose to 86.4, up from 82.9 at the end of May. That was better than expected. But the gain was mostly due to increases in the experience and expectations of upper and middle income households, raising doubts about whether the Biden administration’s policies are benefiting lower-income households.
Both the current condition measure and the expectations gauge rose in early June.
“Consumer sentiment rose in early June, recouping two-thirds of May’s loss,” Curtin said. “The early June gain was mainly among middle and upper income households and for future economic prospects rather than current conditions.”
In early June, the government reported that businesses posted a record number of job openings in April, almost a million more than they had a month before. Not surprisingly, a record-high share of consumers anticipates unemployment to keep falling.
“Stronger growth in the national economy was anticipated, with an all-time record number of consumers anticipating a net decline in unemployment,” Curtin said.