US year-ahead inflation expectations unexpectedly declined in early August, matching a more than two-year low, despite higher gasoline and grocery costs.
(Bloomberg) — US year-ahead inflation expectations unexpectedly declined in early August, matching a more than two-year low, despite higher gasoline and grocery costs.
Americans expect prices will climb at a 3.3% rate over the next year, down from the 3.4% expected in July, according to the preliminary August reading from the University of Michigan. They see costs rising 2.9% over the next five to 10 years, compared to last month’s 3%, data Friday showed.
The university’s consumer sentiment index eased to 71.2 in early August, in line with expectations.
Short-term inflation expectations have shown “remarkable stability for three consecutive months,” Joanne Hsu, director of the survey, said in a statement.
“Consumers have exhibited greater confidence that inflation will indeed continue to slow both in the short and long run. These trends, coupled with the easing expectations themselves, suggest that consumers believe inflation has turned a corner,” Hsu said.
The report showed that buying conditions for durable goods were the most favorable since June 2021. Still, more than a third of consumers say that high prices are eroding their living standards.
Sentiment, while still below pre-pandemic levels, has generally improved as of late amid growing optimism that the US can avoid a recession.
That confidence has stemmed from the steady improvement in inflation, a strong labor market and surprisingly robust economic growth. Consumers reported “dramatic improvement” in news about business conditions, including inflation, the survey showed.
Consumers’ perception of their future financial situation rose to the highest in two years.
The current conditions gauge increased to 77.4, the strongest reading since October 2021. A measure of expectations fell.
–With assistance from Kristy Scheuble.
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