The University of Michigan’s consumer sentiment index, a measure of how Americans feel about the U.S. economy, has slightly decreased to 77.9 in April from 79.4 in March, according to a preliminary version released on Friday. Despite this small drop, consumer sentiment remains close to its four-year high and is about halfway between its all-time low, reached in June 2022 during the peak of inflation, and its pre-pandemic average.
The survey has been conducted since 1980.
“Consumers are reserving judgment about the economy in light of the upcoming election, which, in the view of many consumers, could have a substantial impact on the trajectory of the economy,” Joanne Hsu, director of the consumer survey, told the Associated Press.
In recent months, the index has experienced some volatility. Following November’s low of 61.3, it jumped to a 30-year high for the next two months.
Since then, it has remained relatively stable. Economists believe that strong consumer optimism can lead to increased spending, which generally benefits the economy. As long as the job market remains robust, most experts expect consumer spending to stay healthy.
The recent decline in sentiment was most noticeable among Republicans, while it slightly decreased among independents and increased marginally among Democrats. This trend reflects the growing influence of political partisanship on Americans’ economic views over the past few decades.
A potential factor contributing to the decline in consumer outlook is the recent increase in gas prices. According to AAA, the average national price of a gallon of gas has risen by about 7% from a month ago, reaching $3.63. Additionally, consumers’ perceptions of future inflation have increased, likely due to persistently high prices. Americans expect inflation to be 3.1% a year from now, which is above the Federal Reserve’s 2% target but below the current level of 3.5%.
Although inflation has fallen significantly from its peak of 9.1% in the summer of 2022, it has remained elevated throughout this year. In March, prices excluding volatile food and energy costs rose 3.8% compared to a year earlier, the same as in the previous month and still well above the Fed’s target.
The Associated Press contributed to this article.