Consumer sentiment has taken a hit in July, reflecting ongoing concerns about high prices and inflation. The University of Michigan’s Consumer Sentiment Index dropped to 66.4, down from 68.2 in June, indicating a growing wariness among shoppers despite a moderation in inflation’s pace.
The divide in consumer spending is widening, with higher-income households feeling more confident due to rising asset values and incomes. “Wealthy consumers have shown increased sentiment, driven by economic confidence,” said Joanne Hsu, director of the surveys. In contrast, less affluent consumers continue to struggle with high prices, particularly in essential areas like food and housing, which consume a significant portion of their income.
Data from PYMNTS Intelligence reveals that lower-income households spend 25% of their income on food and 37% on housing, leaving little room for savings or investment. The wealth gap remains stark, with stockholders experiencing a 71% increase in sentiment since June 2022, compared to just an 11% rise for those without stocks.
Inflation expectations remain flat, with long-term expectations holding at 3.0%, above the historical range. The Personal Consumption Expenditures Index showed a 0.3% rise in June expenditures, outpacing a 0.2% growth in disposable income, highlighting the increasing financial pressure on consumers.
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