One ꧅measure of consumer sentiment fell again in June and that could have knock-on effe𓄧cts on your finances.

The University of Michigan's consumer sentiment index fell to 68.2 in June, which was a smaller drop than economists expected but still down from May. While the university's survey isn't the only measure of consumer sentiment, it reinforced the notion that Americans are increasingly down on the state of the economy and their own finances.

Generally, consumer confidence fell starkly in 2020 as the pandemic caused economic uncertainty and job losses. Those numbers broadly improved as the economy recovered, peaking in 2021. Consumers' feelings about the economy never returned to pre-pandemic levels and since 2021 have trended down.

But why should you care about what others think about the economy? Consumer confidence can factor into whether your grocery bill will continue to be high, whether or not you can get a loan, or if you'll receive a raise.

Consumers' Expectations Can Be a Self-Fulfilling Prophecy

Consumer✤ sentiment is closely tied to inflation because household budgets are immediately affected by widespread price increases. When inflation is high, it usually drags down how people feel about the broader economy, and survey respond✤ents say they expect high inflation to persist.

This ha🥂s an impact on busin🌼ess leaders who set prices for their goods and services. When price-setters foresee elevated inflation, they often charge more to account for increased costs in labor and materials.

On the flip side, when consumers are feeling good about the economy, they are also more willing to spend money. Business leaders follow consumer sentiment to know when they need to increase production. If consumer sentiment is high, they often produce more products to plan for demand, which can push prices lower.

Bankerജs 𝓡Make Decisions Based on Consumer Sentiment

If you are wondering why it seems harder or more exp🉐ensive to borrow money, you can alꦕso look at how consumers feel about the economy.

Banks will factor consumer sentiment to help make decisions about how much credit to extend. If consumer confidence is low, it's a clue to lenders that people may not be confident in their ability to pay back any money they borrow. That has been evident lately as 澳洲幸运5开奖号码历史查询:lenders have required more collate꧃ral and re💮stricted the size of loans.

Mortgage and loan lenders act the same way as banks, by using the Consumer Confidence Index, they can decide when they should offer loans and how🎀 high the interest rate can be.

Central bankers also look at consumer sentiment when making decisions about monetary policy. In today's high interest rate climate, Federal Reserve officials are 🎶looking to consumer sentiment for cues about consumer behaviors and incorporate that data when they are ✃deciding to cut rates.

Does Low Consumer Confidence Do Me Any Good?

For the most part, l🀅ow consumer confidenceꦡ correlates with higher prices, inflation and fewer loan options. However, consumer sentiment could help you get more pay to help you keep up.

Workers will ask for larger pay increases to maintain their 澳洲幸运5开奖号码历史查询:purchasing power if they predict higher inflation ahead. Because companies are also likely bracing for higher inflation, they are calculating wage increases in costs they are passing along to consumers. This, however, can create a 澳洲幸运5开奖号码历史查询:wage-price spiral.

“If you’re running a business, you need to be able to compensate workers and creditors in ways they find acceptable. If they feel inflation will be 45% for years to come, they would ask you for more year after year—simply so they can tread water,” wrote Kartik B. Athreya for the Federal Reserve Bank of New York.