U.S. near-term inflation expectations jumped in early April by the most in nearly two years, a troubling signal that the recent progress on taming inflation may be short-lived.
The mid-April reading of the University of Michigan’s survey of U.S. consumers showed households now expect prices to rise by 4.6 percent over the year ahead, the highest level of expected inflation since 2021.
Longer-term expectations, however, remained stable. For the fifth consecutive month, consumers expect inflation to average 2.9 percent over the next five years. Longer-term expectations have remained within a range of 2.9 percent to 3.1 percent for 20 out of the last 21 months, according to Joanne Hsu, the director of the survey.
Consumer expectations for the economy were essentially unchanged following a plunge in March. Both the assessment of current conditions and the gauge of expectations improved slightly from the prior month but remain below the year-ago level.
“Sentiment is now about 3 percent below a year ago but 27 percent above the all-time low from last June. Rising sentiment for lower-income consumers was offset by declines among those with higher incomes. While consumers have noted the easing of inflation among durable goods and cars, they still expect high inflation to persist, at least in the short run. On net, consumers did not perceive material changes in the economic environment in April,” Hsu said.
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