U.S. consumers’ outlook dimmed this month for the first time in four months as many see inflation dragging down conditions, and car purchases are among the most likely to be scratched from their lists.
The University of Michigan sentiment survey showed a 5% decline in consumer outlook. The buying outlook for durable goods alone cratered by 14% to its lowest point in a year due to high prices, according to the survey. Car purchases were the most cited category – 19% – that consumers expect to cut back on or delay.
Current personal finance outlook fell slightly over concerns about purchasing power. The outlook on how personal finances will develop actually rose a tad with an uptick in income expectations, despite the fact that consumers foresee both inflation and unemployment getting worse instead of better, the survey report indicates.
“Overall, consumers are no longer bracing for the worst-case scenario for the economy feared in April when reciprocal tariffs were announced and then paused,” wrote Joanne Hsu, director of consumer surveys.
However, their inflation expectations are on the rise after falling for several months. Looking to the year ahead, they were up about half a percentage point over July, and long-term inflation outlook rose by about the same amount to stay well above 2024 readings.
Taking unemployment expectations alone, 60% of consumers anticipate a worsening job market in the year ahead, comparable to Great Recession levels, the survey found. That compares to 32% last November.
Consequently, less than a quarter of consumers – 24% – foresee their spending levels to be stable for expenses with significant price hikes, concentrated among higher income brackets, according to the survey. Most, meanwhile, expect to cut back on such expenses or even eliminate them. Even fewer higher-income consumers say they’ll keep spending steady, 31%, down from 45% in 2022, when inflation was higher.
Ironically, some of the pre-emptive spending consumers have already been doing since the spring, including car purchases, can push up inflation, the report noted.
