US inflation expectations at the lowest level since June 2021

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Respondents said in December they expected prices to rise 4.4% over the next year, the lowest level since June 2021 and below the preliminary reading, the final University of Michigan consumer survey showed on Friday. For the next five to ten years, expectations dropped to 2.9%.

The college confidence index rose to 59.7 for the month, slightly above the reading in early December. The median estimate from a Bloomberg survey of economists was 59.1.

“Consumers may agree that inflation will slow relative to the rates of recent months, but there is great uncertainty about how much and how fast it will recede,” stated Joanne Hsu, director of the survey.

The latest consumer price data suggests that while US inflation remains extremely high, the worst of it may be over. Although households continue to pay higher prices for various goods and services, such as food, Americans have recently gotten some respite from widespread price pressures. Gasoline prices, for example, have not stopped falling since early November.

That said, the road to the Fed’s 2% target could be long and painful, and many analysts expect the economy to enter a recession next year. Other data released Friday showed the Federal Reserve’s preferred inflation gauge declined in November, while consumer spending stagnated.

Buying conditions for household durables were flat from the preliminary reading, and Hsu said consumers noted the negative impact of higher interest rates when buying high-value items like cars and houses. .

As the month progressed, the group’s indicator of current conditions deteriorated slightly, although it remained above November’s reading.

The measure of future expectations increased.

An alternative gauge of consumer confidence from the Conference Board, which puts more emphasis on labor market sentiment and was released earlier this week, improved to an eight-month high in December. The group’s indicators of current and future conditions improved.

In the Michigan survey, concerns about job losses are intensifying. About 45% of consumers expect unemployment to rise next year, the highest rate since April 2020, Hsu said.