American consumers are increasingly concerned about rising inflation

American consumers felt less optimistic about the economy and increasingly concerned about an accelerated rise in prices, dampening their prospects for recovery.

The University of Michigan Consumer Sentiment Index, which fell to 80.8 from a reading of 85.5 the previous month, withdrew previously released data, which showed a rebound in retail sales during in June, driven by strong demand in electronics stores and clothing outlets and restaurants.

“Instead of creating jobs, stopping and reversing an accelerated inflation rate has become one of the main concerns,” said Richard Curtin, chief economist at the university’s consumer surveys.

Buyers face “adhesive shock”In a range of products, from chicken to used cars. The consumer price index he jumped 5.4% in June compared to a year ago, a maximum of 13 years, after a rise of 5% the previous month. Wholesale prices have also risen, foreshadowing rising costs for consumers. The producer price index rose 7.3% last month, the largest annual increase since at least 2010.

Federal Reserve officials have maintained forecasts that rising inflation will not last too long, but some lawmakers have argued that the central bank and the Biden administration are underestimating the risks that inflation poses to economic recovery.

During a hearing in Congress this week, Fed Chairman Jay Powell pushed back against suggestions the central bank has been complacent about, assuring lawmakers it would be willing to respond if inflation exceeds its expectations.

“I know people are very concerned about inflation,” Powell said. “It simply came to our notice then. . . it is really happening in the economy and in all companies ”.

The Consumer Sentiment Survey found a record level of complaints related to rising prices for homes, vehicles and durable goods, which fueled the index’s fall to its lowest level since late February.

Respondents estimated an inflation rate of 4.8% next year, the highest outlook since August 2008, compared with 4.2% in June.

“Inflation has put additional pressure on living standards, especially in low- and middle-income households, and has led to the postponement of significant discretionary purchases, especially among higher-income households,” Curtin said.

Economists closely monitor sales trends to determine whether consumers are rushing to buy goods now to anticipate future price increases or, instead, use their cash to accumulate savings or pay off debt. .

Data released Friday by the U.S. Census Bureau showed a 0.6 percent increase in retail sales over the previous month, leading to a 0.4 percent drop in expectations, according to a survey of Reuters economists.

Retail spending had slowed in recent months following a boom in business activity earlier this year. In May, sales fell 1.7% as the momentum for federal stimulus controls slowed.

Paul Ashworth, chief U.S. economist at Capital Economics, warned that inflation could have “masked” weakness in real sales activity.

Still, consumers have shown a willingness to spend, with strong demand for goods, while many have been booking hotel rooms and tickets to sporting events now that Covid-19 restrictions have been lifted. almost every corner of the US. Retail sales data does not capture spending on services such as travel accommodation.

“Strong retail sales in June in the U.S. do not suggest any attenuation of consumers’ appetite to spend on physical things despite the economic reopening that offers a wide range of options, such as leisure and hospitality, ”said James Knightley, economist ING’s main international.

Last month, the National Retail Federation increased its sales forecast this year, forecasting annual growth of 10.5% to 13.5% over 2020. It previously forecast an increase of 6.5% .

The June retail sales report showed that food services, including restaurants and bars, continued to recover with a monthly gain of 2.3%. Electronics and appliances, groceries, gas stations, department stores and pharmacies also generated stronger sales. Sales at car dealerships, furniture stores and garden and home centers fell.

Excluding fuel, retail sales rose 0.4% since May, compared with a decline of 1.9% the previous month.