Consumer sentiment in the U.S. fell slightly in early October as the spread of the Covid-19 Delta variant and supply-chain strains weighed on Americans’ mood.
The preliminary estimate of the index of consumer sentiment released Friday by the University of Michigan decreased to 71.4 in October from 72.8 in September. The reading missed estimates from economists polled by The Wall Street Journal, who expected the indicator to come in at 73.0.
“The Delta variant, supply-chain shortages, and reduced labor-force-participation rates will continue to dim the pace of consumer spending into 2022,” said Richard Curtin, the survey’s chief economist.
Consumer confidence hints at Americans’ willingness to spend on goods and services, which is a major driver of the U.S. economy. However, although confidence fell significantly in the last few months due to the spread of the Covid-19 Delta variant, U.S. consumers haven’t shown signs of pulling back spending.
For the past three month, consumer sentiment has remained at the lows first recorded in response to last year’s shutdown of the economy. In February 2020, before the Covid-19 pandemic hit the U.S., the index stood at 101.0.
Another factor which has contributed to the more pessimistic views from American consumers is that confidence in government economic policies has significantly declined during the past six months, Mr. Curtin said.
On prices, Americans’ expected inflation rate for the next year increased to 4.8% compared with a 4.6% rise in September. For the next five years, consumers expect prices to rise 2.8%, easing from the 3.0% registered the prior month.
“Prices remain elevated and there is a risk that a renewed increase in prices for goods such as autos could lead to a further worsening assessment of buying conditions for consumer goods,” Citi economist Veronica Clark said in a note ahead of the data release.
Consumers’ assessment of the current economic conditions fell to 77.9 in October from 80.1 in September. The index of consumer expectations–which reflects the balance of respondents anticipating improved business conditions in the next six months–decreased to 67.2 from 68.1 the prior month.
The final reading for the month will be published Oct. 29.
Source: Dow Jones