Americans are becoming more worried about inflation after resumption of student loans
Washington, DC (CNN) — Persistently high inflation took a toll on Americans’ attitudes this month as many began to pay back student loans following a three-year hiatus.
The University of Michigan’s consumer sentiment index fell 7% in October from the prior month, according to a preliminary reading released Friday. Sentiment in October was gloomy by historical standards, but well above the all-time low recorded in June 2022 when inflation was at a four-decade high.
“Nearly all demographic groups posted setbacks in sentiment, reflecting the continued weight of high prices,” said Joanne Hsu, director of the university’s Surveys of Consumers, in a release.
Overall inflation has picked up in recent months due to higher oil prices, which pushed up retail gasoline prices. The Consumer Price Index rose 3.7% in September from a year earlier, slightly hotter than economists’ expectations, as higher gasoline and rents kept prices elevated.
US consumers are extremely sensitive to changes in gas prices, but after a late-summer surge, the pain at the pump has eased recently
The survey’s index of personal finances plunged about 15%, “primarily on a substantial increase in concerns over inflation,” according to the release. October marks the first month of Americans paying back their student loans since the pandemic-related pause.
The pause gave relief to more than 43 million Americans who have student loans, with the vast majority owing less than $40,000 and nearly one-third owing less than $10,000. The resumption of student loan payments isn’t expected to have a major macroeconomic impact, but US consumers with student debt will still have to factor those payments in to their budgets.
The average monthly student loan payment is between $210 and $314, according to Wells Fargo.
Expectations for inflation in the year ahead rose to 3.8% this month from 3.2% in September, “the highest since May 2023” and “well above the 2.3-3.0% range seen in the two years prior to the pandemic,” according to the university. Expectations can worsen, the longer inflation remains elevated, so the upward pressure from higher gas prices on headline inflation can make Americans more pessimistic about inflation.
Federal Reserve officials pay close attention to longer-run inflation expectations.
This story is developing and will be updated.