In the United States, short-term inflation expectations fell in January to their lowest level in almost two years. A University of Michigan Consumer Confidence Survey revealed that consumer sentiment has risen more than expected.
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Top: US inflation expectations one year ahead, Bottom: Consumer Confidence Index
Source: University of Michigan
Combined with a strong labor market, consumer views about the economy and households are brightening. Gasoline prices have fallen sharply from their summer highs, food prices have calmed down, and the unemployment rate has fallen to its lowest level in 50 years.
The index of current household finances rose to an eight-month high, while the index of expectations rose to a one-year high. More than half of respondents expect income growth over the next year to at least match the pace of inflation, the highest since October 2021.
Both the current situation index and the expectation index in January hit nine-month highs. The index on the purchasing environment for large durable goods also improved amid concerns about rising interest rates.
The outlook for the economy one year ahead has deteriorated. Meanwhile, the five-year outlook for the economy improved, rising to levels not seen since April last year.
“Two-thirds of consumers expect the economy to deteriorate over the next year, with sentiment remaining low despite recent improvements,” said Joan Shu, director of consumer research at the University of Michigan, in a statement. It reflects,” he said. “However, given the current record-low unemployment rate and strong income projections, consumer spending is likely to slow down gradually rather than drop sharply,” it said.
See table for detailed statistics.
Original title:US Year-Ahead Inflation Views Drop to Lowest Since April 2021(excerpt)
(Update with statistic details and publisher comments)
