U.S. consumers see inflation rising at a much higher pace than they did earlier this year, a key survey of consumer sentiment showed Friday.
The University of Michigan’s survey of consumers showed consumers expect inflation to be running at an annual rate of 4.2 percent 12 months from now, a sharp rise from 3.2 percent a month ago. Long-run inflation expectations moved up from 2.8 percent last month to 3.0 percent this month.
The rise in near-term inflation expectations suggests the public has lost some confidence in the Federal Reserve’s policies aimed at bringing inflation down to its two percent target. On Friday, the Commerce Department reported that prices in September rose 0.4 percent for the second consecutive month, a big jump from the 0.2 percent increases seen over the summer.
A poll taken for The Economist magazine earlier this month showed that fifty percent of American adults think inflation will be higher six months from now, an uptick from the September poll showing 47 percent see inflation rising. Just 14 percent expect inflation to fall.
Americans consistently give President Joe Biden a low rating on his administration’s efforts to combat inflation. Just 32 percent of Americans say they approve of the administration’s inflation policies and 61 percent disapprove, including 45 percent who strongly disapprove. Among independents, a key swing vote in presidential elections, just 23 percent approve and 65 percent disapprove.
Seventy-four percent of Americans say inflation is a “very important” issue, with another 20 percent rating it as somewhat important. Twenty-four percent say inflation is the most important issue facing the country, higher than the second- and third-ranking issues—health care and climate change—combined.
The University of Michigan’s consumer sentiment index plunged six percent in October after holding steady for two straight months.
“This decline was driven in large part by higher-income consumers and those with sizable stock holdings, consistent with recent weakness in equity markets,” said the director of the survey, Joanne Hsu. “Across all consumers, one-year expected business conditions plunged 16% and expectations over consumers’ own personal finances in the year ahead fell 8%, reflecting ongoing concerns about inflation and, to a lesser degree, uncertainty over the implications of negative news both domestically and abroad.”