US Year-Ahead Inflation Expectations Fall to Lowest Since 2021
US short-term inflation expectations unexpectedly declined to the lowest level in more than a year and consumer sentiment picked up, helped by falling gasoline prices.
Consumers expect prices will climb at an annual rate of 4.6% over the next year, down from the 4.9% expected a month earlier, to the lowest since September 2021, according to the preliminary December reading from the University of Michigan. Long-term inflation expectations held at 3%.
The sentiment index increased to 59.1 from 56.8 last month, the data showed Friday. The median estimate in a Bloomberg survey of economists called for a reading of 57.
“Consumers’ concerns over high prices in a variety of contexts have eased somewhat over the last month — though these concerns still remain substantially higher than a year and a half ago — showing that the decline in year-ahead inflation expectations was not solely an artifact of current gas prices,” Joanne Hsu, director of the survey, said in a statement.
The pullback in inflation expectations was broad across demographic groups. Inflation has showed signs of easing in recent months — and is projected to slow further in fresh data out next week — but consumers still face historically high prices.
A separate report out Friday showed US producer prices rose in November by more than forecast, driven by services and underscoring the stickiness of inflationary pressures.