The latest measure of how Americans are feeling about the economy is in — and persistently high inflation continues to weigh on consumer sentiment.
The closely watched consumer sentiment index from the University of Michigan landed at 63.5 for April, ticking up only 1.5 points from the month before.
“The mild recovery in consumer sentiment we saw last fall and winter appears to have stalled. Consumers are bracing for the labor market to weaken,” Joanne Hsu, director of the university’s Surveys of Consumers, said in a statement with the report on Friday.
“Sustained, meaningful improvements in economic conditions — which will have to come from cooling inflation, given how little room there is for labor markets to strengthen — will be required for their sentiment to rise again,” she added.
Still, inflation is easing even though it remains stubbornly high, according to a key federal report also released Friday. But consumer spending is softening as well.
The Commerce Department’s March Personal Income and Outlays report — which contains the Federal Reserve’s favorite inflation gauge as well as a comprehensive picture as to how much Americans are bringing in, spending and saving — showed that after a January surge, consumer spending growth trailed off considerably and was flat for March.
The largest increases in consumer expenditures during March were for housing expenses and health care, according to the report. And aside from higher spending at restaurants and other service businesses, consumers cut back in pretty much every other area.
“This is a consumer that’s retrenching,” said Tim Quinlan, senior economist at Wells Fargo. “This is not a consumer with a devil-may-care attitude that just can’t be stopped and can spend through anything.”
Although spending has moderated, there aren’t broader signs that a more alarming deterioration is occurring, said Bernard Yaros, an economist at Moody’s Analytics.
Real disposable income grew again in March, as did the personal saving rate. Separately, a report published Friday by the Bureau of Labor Statistics showed a 1.2% uptick in workers’ wages and benefits during the first quarter.
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