US Consumer Confidence Rises to Three-Month High in November as Inflation Expectations Fall, High Prices and AI Bubble Concerns Persist

According to Zhitong Finance APP, U.S. consumer confidence unexpectedly rebounded to a three-month high in November, mainly due to improved views on personal financial situations and economic prospects. However, high living costs remain the primary pressure facing American households. At the same time, recent fluctuations in the U.S. stock market have sparked consumer concerns over an artificial intelligence (AI) bubble.

Preliminary survey data released by the University of Michigan on Friday showed that the U.S. consumer confidence index rose from 48 in October to 51 in November, reaching a three-month high and significantly exceeding the 48 forecast by economists surveyed by Bloomberg.

This improvement in consumer confidence is mainly concentrated among respondents with independent political stances. The data shows that consumer confidence among independent voters has risen to the highest level in more than a year, while the confidence of both Democratic and Republican supporters has declined.

Despite the overall improvement in confidence, high prices remain the issue of greatest concern for U.S. consumers. The survey found that about 57% of respondents proactively mentioned that persistently high prices are eroding their standard of living, the highest proportion since May this year.

Although U.S. company layoffs are still relatively limited and economic growth remains resilient, many households’ real purchasing power continues to come under pressure as price increases outpace wage growth. Previous data showed that the U.S. economy grew at an annual rate of 3.4% in the third quarter, faster than market expectations and the highest in a year. However, robust macroeconomic performance has not yet fully translated into consumers feeling an improvement in their own financial situations.

The high costs of food, gasoline, and housing have also become important topics in the U.S. midterm elections. The significant victory of the Democratic Party in these elections reflects some voters' dissatisfaction with the cost of living and the overall economic situation.

Inflation Expectations Have Eased but Remain High

It is worth noting that, although consumers remain dissatisfied with current price levels, their inflation expectations for the future have improved. The survey showed that U.S. consumers expect prices to rise by 4.3% over the next year, falling to a three-month low. Meanwhile, consumers expect the average annual inflation rate over the next five to ten years to be 3.4%, also lower than last month’s level.

This indicates that, although households continue to face considerable cost pressures, consumers' concerns over the pace of future price increases have eased.

For the Federal Reserve, consumer inflation expectations are an important reference for gauging future price pressures. The retreat in short- and long-term inflation expectations may send a positive signal, but the current levels remain high, suggesting that inflation risks have not fully subsided.

U.S. Stock Market Volatility Sparks AI Bubble Concerns; Confidence Among Wealthy Households Drops Notably

In addition to inflation, recent sharp fluctuations in the financial markets have also begun to affect U.S. consumers’ economic outlook.

Joanne Hsu, director of the University of Michigan Consumer Survey, stated in a press release: “Consumer comments indicate that concerns about a potential AI bubble are intensifying.” She noted that the group of consumers with the largest stock investment portfolios saw their assessment of personal finances drop by 12% this month, falling to the lowest level since April this year.

Hsu believes this may be related to stock price fluctuations in recent weeks. By contrast, other wealth groups saw a moderate improvement in their assessment of personal finances.

This divergence suggests that the recent correction in U.S. stocks has had a varied impact on different households. Consumers with significant stock assets may be more worried about their financial conditions due to market volatility, while confidence among other households has somewhat recovered.

Recently, concerns have been mounting in the market regarding the scale of investment and future returns in the AI sector, leading to a notable sell-off in technology stocks. Survey results indicate that these worries have started to spread from the financial markets to consumer sentiment.

However, overall, U.S. consumers’ assessments of their personal finances have shown improvement.

The indicator of current personal financial conditions in November rose to a four-month high, and evaluations of conditions for purchasing durable goods also rebounded from historical lows. Meanwhile, two indicators measuring current economic conditions and future economic expectations both reached their highest levels since August, showing a more optimistic consumer outlook on the economic environment.

The Job Market Remains Resilient, Providing Support for Consumer Confidence

Another set of economic data released on the same day also showed that the U.S. labor market remains robust.

Nonfarm employment in the U.S. increased by 165,000 in October, surpassing the forecasts of all surveyed economists, and the unemployment rate also declined slightly. Strong job growth helps sustain household income and consumption, thus supporting consumer confidence in future economic prospects to a certain extent.

Nevertheless, despite the strong job market, persistently high prices continue to limit further recovery in consumer confidence.

It is worth noting that the University of Michigan’s preliminary consumer confidence survey covered responses from October 20 to November 2, so it does not reflect market changes following the November 3 midterm election voting day.

Overall, the unexpected rebound in U.S. consumer confidence in November indicates that pessimism about personal finances and economic prospects has eased. However, persistently high prices continue to erode household purchasing power, and the risks posed by AI bubble concerns and U.S. stock market volatility mean the foundation for a recovery in U.S. consumer confidence remains fragile.

For the market, the improvement in consumer confidence and the easing of inflation expectations send a somewhat positive signal. However, strong job growth and still-elevated inflation expectations mean that the Federal Reserve’s future monetary policy path remains uncertain.