The U.S. economy seems to be heading into a recession. The holiday shopping season is approaching, but consumers fear that the country is facing an economic downfall. Joanne Hsu, the director of the university’s Surveys of Consumers, stated that the month-over-month decline in sentiment noted that pessimistic mood on the markets caused the University of Michigan’s consumer sentiment index to plunge to 56.8 this month. The index lost almost one-third of the gains since June.
According to Hsu, thus far, strong incomes have aided consumers, especially lower-wage workers, to weather the soaring inflation. But they might curtail their spending in the future. Moreover, wealthier households are already dealing with declining stock markets and home values. That could also weigh on their willingness to spend money.
Meanwhile, the U.S. Federal Reserve continues hiking interest rates. That affects people’s desire to buy homes, cars, and other high-priced items. The agency has enacted a series of sharp interest rate increases in order to hinder the rising inflation.
The University of Michigan’s Surveys showed that about 83% of respondents stated that it was a bad time to buy a house. It also reported that most consumers expect inflation to remain relatively unchanged over the next five years. That means people believe that prices will remain high, and they might demand increased wages. On the other hand, this could push businesses to hike prices.
What about the Japanese economy?
The Japanese government announced on Thursday that the country’s economy remained unchanged in November. According to the new report, Japan experienced a moderate rebound. However, the authorities remain cautious as global financial market fluctuations and the economic slowdown could affect the country’s growth.
Last week, data showed that the Japanese economy shrank unexpectedly in Q3 due to rising import costs. The latter hurt both consumption and business activity. However, the country managed to recover over the last few days. The government noted that the economy is picking up moderately.
