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Important Takeaways:
- Americans are down on the economy (again), with inflation topping election concerns
- After a spurt of optimism, Americans are feeling a little more glum about the economy — again.
- Consumer sentiment, a gauge of Americans’ economic perceptions, is at a six-month low, according to a closely watched index by the University of Michigan. The measure notched its biggest drop since 2021, reflecting the persistent tug of inflation on household budgets and fueling fears that rising prices, unemployment and interest rates could all worsen in the coming months.
- That pessimism is altering consumers’ spending habits. McDonald’s, Home Depot, Under Armour and Starbucks all recently reported disappointing earnings, as people cut back on fast food, kitchen renovations, sneakers and afternoon lattes. Retail sales were flat in April after decent pickups in February and March. Meanwhile, Walmart reported a strong first quarter this week, nudged upward by high-income shoppers, executives said.
- And gas prices, while easing in recent weeks, are up overall for the year, just ahead of the busy summer season.
- In recent weeks, some of the country’s largest companies have mentioned they are feeling the effects of inflation. At Starbucks, for example, customers are coming in less frequently.
- “We continue to feel the impact of a more cautious consumer,” Starbucks CEO Laxman Narasimhan said in an earnings call last month. “Many customers are being more exacting about where and how they choose to spend their money, particularly with stimulus savings mostly spent.”
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