With the latest University of Michigan consumer survey published on Friday, all eyes were on respondents’ near- and long-term inflation expectations.
Latest figures released by the BLS on Thursday reinforced observations that inflation may have peaked, thanks to a 0.1% month-over-month decline in December CPI. As such, short-term inflation expectations slumped to the lowest since April 2021 in early January; US consumers are now anticipating prices will rise 4% over the next 12 months.
Meanwhile, the sentiment index jumped from 59.7 to 64.6, the highest in nine months and surpassing economists’ forecasts calling for a reading of 60. With respect to medium-term inflation expectations, respondents said they foresee price pressures rising to 3%, up from previous forecasts of 2.9%.
Americans’ view on personal finances also increased in January, rising 16% to the highest reading in eight months. The majority of the survey’s respondents said they expect their wages to rise in unison with prices in the next 12 months, the largest proportion since October 2021. Conditions for major household purchases also increased, albeit respondents noted higher interest rates as an impediment.
Although markets are now pencilling in a 25 basis-point interest rate hike come the Fed’s next policy meeting in February, the survey’s respondents still expect a recession will occur with the next year. However, the outlook improved for the next five years. “That said, given current historic lows in unemployment and strength in expected incomes, a gradual slowdown in spending appears more likely than a cliff-like drop,” explained survey director Joanne Hsu.
Information for this briefing was found via the University of Michigan. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.