Agents and brokers are likely to continue encountering hesitant consumers, as the University of Michigan reports that preliminary sentiment dropped for the second month in a row on Sept. 11.
The consumer sentiment index—which utilizes personal finances, business conditions and buying conditions to measure consumers’ attitudes toward the overall economy—now sits at 47.8 as a preliminary indicator for September as a whole. Survey of Consumers Director Joanne Hsu noted that this is a slight decrease from August’s final index of 51.7.
“Consumer sentiment receded less than four index points for the second consecutive month of decreases,” she stated. Conflicts in the Middle East seem to be the main driver of consumer sentiment, as Hsu mentions that “sentiment is now 16% below February, prior to the start of the Iran conflict, and 13% lower than a year ago,” in the report.
“Year-ahead expectations for both personal finances and business conditions plunged,” she said. “With a resurgence in fuel prices and trade tensions, consumers anticipate greater pressures on their pocketbooks to come.”
Liz Thomas, SoFi’s chief marketing strategist, echoed Hsu’s point and said that the decrease is “driven by the future expectations component,” in a post on social media. “The Iran war and oil prices are likely playing a role, as inflation expectations have also moved higher,” she continued.
Global conflicts are not the only issues permeating the preliminary data. UMich’s report comes as elevated mortgage rates weigh on the industry, with Freddie Mac reporting that the average 30-year fixed-rate mortgage (FRM) reached a 14-month high of 6.76% yesterday.
The inflation issue continues to remain on experts—and likely consumers’—minds as well. Hsu states that “year-ahead inflation expectations jumped from 4.0% last month to 4.6% this month, the highest reading since June.”
Currently, inflation maintains its rate of 3.4% as reported by the Bureau of Labor Statistics (BLS) in their Consumer Price Index summary for August. The rate is still nearly double the Federal Reserve’s goal of 2%, and experts theorize whether the board will vote to raise rates or leave them alone.
Heather Long, chief economist at Navy Federal, states that there is an 85% chance that there will be a rate hike at next week’s Fed meeting in a post on social media.
“The risks are growing that inflation remains entrenched,” she said. “Fed Chair Warsh doesn’t want to make the same mistake Powell did of waiting too long to hike.”
Yet—as a step away from his predecessors—Fed Chairman Kevin Warsh announced that he would not pursue forward guidance in his Jackson Hole speech. Because of this, investors and economists have less insight on upcoming Fed decisions.
Realtor.com Chief Economist Danielle Hale, looking ahead to the Fed’s next meeting this month, said “whether a Fed rate hike comes in September or not, the pressure on mortgage rates is here already and doesn’t show signs of relenting.”
In the long-run, inflation expectations ticked up to 3.4%, which is a slight increase from the 3.3% expectation throughout May to July. Hsu notes that these expectations remain higher than their 2024 range of 2.8% to 3.2%.
Despite the bleak outlook on a monthly and annual basis, the report states that the five-year expected business conditions remained stable and are well below their historical average. Hsu states that this suggests that “consumers believe that emerging risks this month may not have further worsened the long-run outlook.”
