Inflation is falling, but consumers aren’t celebrating yet

The consumer price index for September released Thursday morning showed a continued decline in inflation. Inflation clocked in at 2.4% for the last 12 months, compared to 2.5% the month before.

The annual CPI inflation rate peaked at 9% year-over-year back in June 2022, so these fresh figures are welcome news as inflation inches toward the Federal Reserve’s 2% target. But consumers aren’t exactly jumping for joy for the slowdown in inflation.

Americans really do get that inflation is being tamed, noted Joanne Hsu, director of the University of Michigan consumer surveys. 

“Consumers have absolutely noticed that inflation has slowed, and they do expect this slowdown to stick,” she said.

While consumer sentiment has been creeping up from the low it hit when inflation peaked, it’s not nearly back to pre-pandemic levels. 

“Consumers remain quite frustrated by the persistence of high prices, despite the fact that inflation has slowed,” said Hsu. “And those two things aren’t really in contradiction.”

Prices being so much higher than before the pandemic is still a shock, said Sofia Baig, an economist at polling firm Morning Consult.

“When we’ve asked consumers a few times over the past year, the top concerns are all related to prices — so, housing costs, grocery costs, gas prices,” she said.

Joanne Hsu said this is making a lot of folks feel poorer: “Over 40% of consumers are telling us that their personal finances are being eroded by high prices.”

Even though wages have been rising faster than prices for well over a year, people still don’t feel much better, Baig added.

In fact, when Morning Consult asked consumers what they’d prefer to help them deal with inflation, “most people actually said they would rather prices go down” versu having their wages rise to keep up, she added.