Consumer confidence in the US rose to a three-month high in November, inflation expectations fell back to high prices and concerns about the AI bubble still exist

The Zhitong Finance App learned that consumer confidence in the US unexpectedly rebounded to a three-month high in November, mainly due to improved public views on personal financial conditions and economic prospects. However, the high cost of living is still the main pressure facing American households. At the same time, recent fluctuations in US stocks have also raised consumer concerns about the artificial intelligence (AI) bubble.

According to preliminary survey data released by the University of Michigan on Friday, the US consumer confidence index rose from 48 in October to 51, a three-month high, clearly better than the 48 predicted by economists in the Bloomberg survey.

This improvement in consumer confidence was mainly focused on a group of respondents with independent political positions. Consumer confidence among independent voters rose to the highest level in more than a year, while the confidence of supporters of both the Democratic Party and the Republican Party declined, according to the data.

Despite the recovery in overall confidence, high prices are still the biggest concern of American consumers. According to the survey, about 57% of respondents took the initiative to mention that continuing high prices are eroding their standard of living, and this percentage has reached the highest level since May this year.

Although the scale of US corporate layoffs is still relatively limited, economic growth remains resilient. As prices rise faster than wages, the actual purchasing power of many households continues to be under pressure. According to previously released data, the US economy grew at an annual rate of 3.4% in the third quarter. The growth rate was higher than market expectations, and hit the fastest level in a year. However, strong macroeconomic performance has yet to fully translate into consumers' feelings of improvement in their financial situation.

The high cost of food, gasoline, and housing also became an important issue in the US midterm elections. The Democratic Party's clear victory in this election reflects the dissatisfaction of some voters with the cost of living and the overall economic situation.

Inflation expectations have declined somewhat but are still at a high level

Notably, although consumers are still unhappy with current price levels, their expectations for future inflation have improved. According to the survey, American consumers expect prices to rise 4.3% in the next year, falling to a three-month low. Meanwhile, consumers expect an average annual inflation rate of 3.4% over the next five to ten years, which is also lower than last month's level.

This shows that although households are still under greater pressure on the cost of living, consumers' concerns about the rate of future price increases have eased.

For the Federal Reserve, consumer inflation expectations are an important reference indicator for measuring future price pressure. The fall in short-term and long-term inflation expectations may send a positive signal, but the current level of expectations is still high, which means that the risk of inflation has not completely subsided.

Fluctuations in US stocks have triggered concerns about the AI bubble, and the confidence of wealthy families has declined markedly

In addition to inflation, recent sharp fluctuations in financial markets have also begun to affect the economic expectations of American consumers.

Joanne Hsu, head of consumer research at the University of Michigan, said in a statement: “Consumer reviews indicate that their concerns about a possible AI bubble are growing.” She pointed out that the personal financial status evaluation index for the consumer group with the largest stock portfolio fell 12% this month, to its lowest level since April this year.

Hsu believes this may be related to fluctuations in stock prices in recent weeks. In contrast, all other wealth level groups showed moderate improvements in their evaluations of personal financial status.

This differentiation shows that the impact of recent US stock adjustments on different households is not the same. Consumers with large stock assets may be more concerned about their wealth due to market fluctuations, while financial confidence in other households has recovered.

Recently, market concerns about the scale of investment and future returns in the AI sector have continued to heat up, and technology stocks have been clearly sold off. The survey results show that this concern has begun to spread from financial markets to consumer sentiment.

Overall, however, American consumers' evaluations of personal financial status have improved.

In November, consumers' current personal financial status indicators rose to a four-month high, and evaluations of purchasing conditions for durable goods also rebounded from the lowest level in history. Meanwhile, both indicators measuring current economic conditions and future economic expectations have risen to the highest level since August, indicating that consumers' views on the economic environment have improved.

The job market remains resilient to support consumer confidence

Another economic data released on the same day also showed that the US labor market is still stable.

The number of non-farm payrolls in the US increased by 165,000 in October, exceeding the forecasts of all economists interviewed, and the unemployment rate also declined slightly. Strong employment growth helps maintain residents' income and consumption capacity, and supports consumers' confidence in future economic prospects to a certain extent.

However, despite the good performance of the job market, continued high prices limited the further restoration of consumer confidence.

It should be noted that the survey period for this University of Michigan Preliminary Consumer Confidence Survey was from October 20 to November 2, so it did not cover market changes that occurred on or after November 3 midterm election voting day.

Overall, the unexpected recovery in consumer confidence in the US in November showed that pessimism about personal financial conditions and economic prospects abated. However, high prices continue to erode household purchasing power. Coupled with concerns about the AI bubble and the risk of wealth effects brought about by fluctuations in US stocks, it means that the recovery foundation for American consumer confidence is still uncertain.

As far as the market is concerned, improving consumer confidence and falling inflation expectations send some positive signals, but strong employment growth and still high inflation expectations also keep the Fed's future monetary policy path facing uncertainty.