US consumers’ year-ahead inflation expectations picked up in August to a three-month high as gasoline prices increased, weighing on sentiment.
(Bloomberg) — US consumers’ year-ahead inflation expectations picked up in August to a three-month high as gasoline prices increased, weighing on sentiment.
Consumers expect prices will climb at an annual rate of 3.5% over the next year, up from the 3.4% expected in July, according to the final August reading from the University of Michigan. They see costs rising 3% over the next five to 10 years, matching the prior two months, data Friday showed.
As a result, the sentiment index retreated to 69.5 from an almost two-year high of 71.6 in July. The latest reading compares with a 71.2 median estimate in a Bloomberg survey of economists.
“While consumers noted that inflation is nowhere near the peaks from last summer, their views continue to be influenced by high prices,” Joanne Hsu, director of the survey, said in a statement.
The report showed a larger share of consumers “spontaneously” mentioned high fuel prices late in the month. However, they don’t anticipate bigger increases in the cost of gasoline during the coming year.
Moreover, the smallest share of respondents since October 2021 said they expect inflation to exceed their income growth in the year ahead. Combined with still-solid views of the job market, that signals a possible increase in optimism about future business conditions.
Cooling inflation and a resilient labor market have allowed consumers to keep spending. This renewed momentum is leading some economists to push out their recession calls, while others are scrapping them altogether.
Buying conditions for durable goods and expectations of personal finances improved this month to the highest levels in two years.
The current conditions gauge eased to 75.7 from 76.6. A measure of expectations fell to 65.5 this month from 68.3 in July.
–With assistance from Kristy Scheuble.
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