Long-Term US Inflation Expectations Drop to One Year

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Long-Term US Inflation Expectations Drop to One Year

The university’s sentiment index rose to 51.1 from a historic low of 50 in June. The median estimate in a survey of economists called for no change.

“Consumers remained in agreement over the deleterious effect of prices on their personal finances,” Joanne Hsu, director of the survey, said in a statement. Roughly half of respondents blame inflation for lowering their living standards, the worst since the 2008 financial crisis, she said.

The university’s measure of future expectations, however, declined to 47.3, the lowest since 1980.

A gauge of current conditions rose to 57.1, the biggest jump since April 2021, likely reflecting lower gas prices as well as a strong labor market. Retail gasoline prices stand at $4.58 a gallon, down from a record $5.02 in mid-June, according to AAA data.

Story Highlights

  • Consumers expect prices will rise at an annual rate of 2.8% over the next five to 10 years, down from June’s 3.1% and the lowest since July of last year, University of Michigan data showed Friday. They see costs rising 5.2% over the next year, compared to last month’s 5.3%.

  • The easing in inflation expectations may provide some solace to Federal Reserve policy makers that current price pressures aren’t becoming embedded in the US economy. Still, the figures underscore the painful toll of inflation, which has more than offset wage gains for most Americans and eroded consumers’ purchasing power.

In a news conference Thursday, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said that the consumer is “in very good shape,” though “obviously their confidence is dropping.”

Buying conditions for household durable goods improved somewhat, though remained historically weak, tied to improving supply-chain constraints, Hsu said. A separate report earlier Friday showed US retail sales broadly advanced in June.

A measure of current assessments of personal finances continued to deteriorate, reaching its lowest point since 2011, according to the university’s report. Still, the labor market has been an economic bright spot. Private-sector employment recovered to pre-pandemic levels in June and the unemployment rate held near a five-decade low, signs of resilient demand.