By Bryan Mena, CNN
Washington (CNN) — Americans are souring on the economy again to levels seen rarely in the post-World War II era, raising the question of what it means for spending, economic growth and other key metrics gauging the world’s largest economy.
Consumer sentiment fell this month to a final reading of 55.1, the University of Michigan said in its latest survey released Friday. The reading was the seventh-lowest on records going back to 1952.
Americans are growing pessimistic for the same reason they did so just a few months ago; fears of higher inflation, which could worsen because of President Donald Trump’s aggressive trade policy. On Thursday, Trump announced new tariffs on trucks, furniture and pharmaceuticals.
Americans are now also jittery over the labor market.
“Consumers continue to express frustration over the persistence of high prices, with 44% spontaneously mentioning that high prices are eroding their personal finances, the highest reading in a year,” said Joanne Hsu, the Michigan survey’s director, in a release.
“Interviews this month highlight the fact that consumers feel pressure both from the prospect of higher inflation as well as the risk of weaker labor markets,” she added.
What it means for the US economy’s future
Since the pandemic, sentiment hasn’t been a good predictor of future spending behavior, but the labor market might be.
In the summer of 2022 when inflation was raging at four-decade highs and consumer sentiment plunged to its lowest level on record, Americans continued to spend at a solid clip in the following months. And in 2023 when a standoff in Congress prompted sentiment to decline, Americans still splurged throughout that year, namely on concerts and travel.
American still haven’t reined in their spending: Personal consumption expenditures climbed 0.6% in August from the prior month, the Commerce Department said Friday, in the thick of the back-to-school shopping season. After adjusting for inflation, spending rose 0.4% last month.
“Recent data show consumers resumed spending over the summer, especially those with higher incomes. And why wouldn’t they? Unemployment is still low, nominal wages are still increasing and asset valuations are near all-time highs,” Richmond Fed President Tom Barkin said Friday at an event in Washington, DC.
This story is developing and will be updated.