Quiver Quantitative - U.S. consumers' outlook on long-term inflation hit a new peak, reaching levels unseen since 2011, as concerns over rising costs continue to dampen sentiment. According to early November data from the University of Michigan, expectations for inflation over the next five to ten years surged to an annual rate of 3.2%, a significant jump from the 3% predicted in the prior month. This uptick comes despite short-term forecasts indicating a 4.4% rise in prices over the next year, an increase from the previously estimated 4.2%. The report also noted a paradoxical climb in anticipated gasoline prices, contradicting the declining trend at the pump observed since late September.
Consumer confidence took a hit, with the university's sentiment index dropping to a six-month trough of 60.4, marking a figure lower than any economists forecast in a Bloomberg survey. The sentiment deterioration reflects growing unease about future economic conditions and purchasing environments, despite a marginal improvement in personal financial outlooks. Joanne Hsu, the survey's director, pointed out that the grim mix of anticipated high prices, rising borrowing costs, and potential labor market cooling does not bode well for sustained consumer spending and economic growth.
The report underscores the complex challenges facing the Federal Reserve as it contemplates additional rate hikes amidst mounting inflation expectations and fragile consumer spending resilience. Consumers' perceptions of buying conditions for durable goods have markedly worsened, with the index for such purchases experiencing its steepest decline since last November. An unprecedented number of respondents attributed poor vehicle purchasing conditions to high borrowing costs and stringent credit, the highest percentage to do so since 1982.
In this climate of fiscal uncertainty, indices for both current conditions and future expectations have sunk to their lowest since May, with the present conditions measure falling to 65.7 and the expectations index to 56.9. This decline in consumer sentiment, tied to persistent price concerns, signals potential headwinds for the U.S. economy's path ahead.
This article was originally published on Quiver Quantitative