US 12-month inflation forecast rebounds after four months of decline

The website consumer inflation expectations for the next 12 months, as the University of Michigan reports in its Consumer Confidence Survey, rebounded in February to 4.2%.This was up from the 3.9% rate recorded in January, breaking a four-month streak of declines, but still below the 4.4% rate recorded in December.

For their part, the The long-term inflation forecast remained unchanged at 2.9%. for the third month in a row, and has been in the narrow range of 2.9-3.1% for 18 of the past 19 months.

“Uncertainty about near-term inflation expectations has increased recently and remains significantly elevated, indicating that inflation is stabilizing. the possibility of continued volatility in inflation forecast for the coming year.. By contrast, uncertainty about long-term inflation has declined in recent months, although it remains well above the averages of the past 20 years,” the report said. Joanne HsuDirector of the University of Michigan Consumer Survey.

For their part, analysts of Macroeconomics Hall of Fame note that long-term inflation expectations “are very sensitive to the current rate of inflation for food and energy, which has shifted considerably downwards”.

“We believe this downward movement will continue in the coming months, and whether the five- or ten-year inflation forecast follows suit. will return to the pre-Covid trend, just below 2.5%, by the end of 2023.” they point out.

About the consumer confidence indexin its preliminary reading for February rose to 66.4, from 64.9 in January, and also above the February 2022 reading of 62.8. It was also above the consensus forecast, which expected it to come in at 65.

“We expected the A slight increase in gasoline prices in January would weigh on consumer confidence.but they seem to ignore that and focus on the recent modest rebound in stock prices. The relationship between the consumer confidence index and spending is ad hoc at best, but the recent rebound is encouraging and suggests that the still-large savings surplus built up during Covid continues to cushion the blow of a tightening. aggressive Fed,” notes Pantheon Macroeconomics.

The website current economic conditions index also increased to 72.6 from 68.4 previously, while the expectations section fell from 62.7 in January to 62.3.

” Generally, high prices continue to weigh on consumers despite recent moderation in inflationand confidence remains more than 22% below its historical average since 1978. Combined with fears of rising unemployment, consumers are poised to be more cautious about spending in the over the next few months,” adds Mr. Hsu.

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