By Lucia Mutikani
WASHINGTON (Reuters) – U.S. consumer confidence fell to a nearly 11-year low in early May on inflation concerns, but household spending remains supported by a strong labor market and huge savings, should keep the economy expanding.
A University of Michigan survey showed on Friday that deteriorating sentiment, which some economists say has slipped into a recession zone, affected all demographic groups, as well as geographic and political affiliation.
Gasoline prices and the stock market weigh heavily in the survey.
Fears that the Federal Reserve may have to tighten monetary policy to reduce inflation have triggered a slide in stocks on Wall Street.
«But confidence has been a poor guide to consumption growth in recent years, so we wouldn’t read too much into that signal,» said Michael Pearce, senior US economist at Capital Economics in New York.
«Just because consumers resent paying higher prices and limited availability doesn’t mean they won’t keep making those purchases,» he added.
The University of Michigan’s preliminary index of consumer confidence slumped 9.4% to 59.1 earlier this month, the lowest reading since August 2011. Economists polled by Reuters had forecast the index to drop to 64.
The sharp decline contrasts with the Conference Board consumer confidence survey, whose index remains well above the lows of the COVID-19 pandemic.
INFLATION AT A PEAK
There have been fears that high inflation and Federal Reserve interest rate hikes, which began in March, could curb growth sharply or even push the economy, which shrank in the first quarter, into recession.
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While inflation is likely to remain elevated, there are increasing signs that price pressures have peaked.
A separate report from the Labor Department showed import prices were unexpectedly flat in April as falling oil costs offset rising food and other prices. Import prices had increased by 2.9% in March.
Economists had forecast import prices, which exclude tariffs, to rise 0.6%. In the 12 months to April, import prices are up 12%, after accelerating 13% in the year to March.
Other government data this week showed monthly consumer prices rose at the slowest pace in eight months, while producer prices posted the smallest increase since last September.
(Reporting by Lucia Mutikani; Editing in Spanish by Javier López de Lérida)