(WASHINGTON) — Consumer sentiment dropped in September close to the lowest level ever recorded in the 74-year history of the University of Michigan’s monthly survey, fresh data on Friday showed.
Shopper attitudes soured as a monthlong bout of inflation squeezed consumers and an underlying oil supply shock showed little sign of imminent resolution.
The final reading of the University of Michigan index registered at 48.1 in September, marking the second-lowest final reading ever recorded. The index hit a historic low of 44.8 in May, just months after the outbreak of the Iran war, before ticking slightly upward to a level of 51.7 by August.
Prices rose at an annual rate of 3.4% in August, the most recent month on record, federal government data showed. Inflation stands more than a percentage point higher than the Federal Reserve’s target rate of 2%.
The average price of a gallon of gas in the U.S. is $4.49, according to AAA, marking a roughly 50% jump since the war began in late February.
Shoppers expect inflation to rise even more over the next year, the University of Michigan consumer survey found, while individuals’ view of their financial outlook has worsened.
Democrats and Republicans alike displayed sizable declines in consumer sentiment in September from the previous month, Surveys of Consumers director Joanne Hsu said in a statement on Friday.
In response to rising prices, a key long-term Treasury rate hit its highest level in nearly two decades on Wednesday, days after the Federal Reserve raised benchmark borrowing costs. The rise in borrowing costs has pushed up rates for loans like credit cards and mortgages, threatening to worsen the financial crunch.
Investors peg a two in three chance of another quarter-point interest rate hike next month, according to the CME FedWatch Tool, a measure of market sentiment.
Despite a stubborn bout of inflation, the economy remains fairly robust by some measures.
A blockbuster jobs report earlier this month showed employers added 162,000 workers in August, demonstrating continued resilience for the nation’s labor market. The economy grew over three months ending in June, defying fear of a downturn triggered by the Iran war.
Still, persistently elevated prices have continued to take a toll on shoppers, Fed Chair Kevin Warsh said at a press conference in Washington, D.C., last week.
“The plain fact is that inflation is too high and has been for too long,” Warsh said.
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