US 12-month inflation forecast improves for fourth straight month

Current reading is the lowest since April 2021but remains well above the 2.3-3.0% range seen in the two years before the coronavirus pandemic.

Inflation expectations The long-term inflation forecast has changed little since December, standing at 3.0%.again remaining within the narrow range of 2.9-3.1% for 17 of the past 18 months. This figure also remains high compared to the range of 2.2 to 2.6% observed in the two years preceding the pandemic.

“Uncertainty about both measures of inflation expectations remains high, and. The evolution of global factors over the next few months could lead to a reversal of recent improvements.“, says Joanne Hsu, director of the University of Michigan consumer survey.

The analysts of Macroeconomics Hall of Fame consider long-term expectations to be “probably noise rather than signal, because”. this measure has stagnated nearly 3% since the summer of 2021.“.

“But it is sensitive to food and gas prices, and we expect it to decline in the coming months, returning to the pre-crisis trend of around 2-2.5%. Inflation expectations are back under control.“, they add.

Of Oxford Economics point out that “encouragingly for the start of the year, inflation forecasts have moderated due to lower gasoline prices”, although they see “the likelihood that high food prices are likely to limit the improvement in inflation expectations”.“.

CONSUMER SENTIMENT

About the consumer confidence indexin its preliminary reading for January came in at 64.6, up from 59.7 in December, but still below the January 2022 reading of 67.2. It was also well above the consensus forecast, which expected it to come in at 60.5.

The index of the current economic conditions also increased to 68.6 from 59.4 previously, while the expectations component fell from 59.9 in December to 62.

” The Consumer confidence remains low by historical standards, but continues to rise for the second consecutive monthup 8% from December and down 4% from a year earlier. Current personal finance assessments rose 16% to their highest level in eight months, helped by rising incomes and falling inflation,” Hsu added.

The director of the investigation noted that ” the long-term outlook rose 7% to its highest level in nine months. and is now 17% below its historical average.

Of Macroeconomics Hall of Fame Note that ” people like cheaper gas“The survey revealed that respondents have ‘reacted positively’ to falling fuel prices over the past two months.

” Globally, Consumer sentiment remains depressed in all regular surveys.after wavering following the invasion of Ukraine in February last year, but has stabilized in recent months. We are waiting for a weakening labor market in the coming months to make people nervous about job security, so that we can bet on a further deterioration in confidence.“, they conclude.

For Oxford Economicsconsumer confidence improved in January due to lower energy prices and improved financial market conditions.but it does not warrant any change in short-term forecasts of real consumer spending because, at best, the relationship between confidence and consumption is loose”.