This doesn’t bode well for the economy. The University of Michigan Consumer Sentiment survey fell to a 10-year low of 62.8 in February from 67.2 in January and 76.8 a year earlier.
The decline stemmed entirely from a 12.9% drop in confidence among people making $100,000 a year or more.
“The February descent resulted from inflationary declines in personal finances, a near universal awareness of rising interest rates, falling confidence in the government's economic policies, and the most negative long-term prospects for the economy in the past decade,” Richard Curtin, chief economist of the university’s Surveys of Consumers.
Almost all the report’s interviews were held prior to Russia’s invasion of Ukraine, so that didn’t have an impact on the survey.
“The most likely linkage to the domestic economy is through rising energy prices, with the size and length of the potential increases subject to substantial uncertainty,” Curtin said.
“This will complicate the [Federal Reserve's] policy actions, tilting their objectives to focus more on inflation at the cost of slower growth and higher unemployment.”
But the sanctions levied against Russia will likely trigger responses that could hurt the U.S. economy, “requiring the Fed to give special consideration to any associated economic slowdown and rising unemployment,” Curtin said.
Economists agree that the war will likely generate uncertainty among businesses and consumers as to their financial prospects . “We don’t know where we’re going. It’s the uncertainty that’s hard,” Diane Swonk, chief economist at accounting/consulting firm Grant Thornton, told the Los Angeles Times.
The non-wealthy are likely to suffer most. “The average American household is going to bear the burden of Vladimir Putin’s invasion of Ukraine,” Joe Brusuelas, chief economist of accounting/consulting firm RSM, told CNN.
