US near-term inflation expectations jumped in early April by the most in nearly two years amid higher gas prices, but consumer sentiment still rose.
(Bloomberg) — US near-term inflation expectations jumped in early April by the most in nearly two years amid higher gas prices, but consumer sentiment still rose.
Consumers expect prices will climb at an annual rate of 4.6% over the next year, up from 3.6% in March, according to the preliminary April reading from the University of Michigan. They see costs rising 2.9% over the next five to 10 years, holding at that level for a fifth month, data Friday showed.
Expectations for gas prices in the coming year increased to the highest in six months, and five-year expectations were the most in almost a year.
“These patterns reveal that consumers are fully aware that inflation has softened from its peak, but that high prices continue to make them feel less financially secure,” Joanne Hsu, director of the survey, said in a statement.
What Bloomberg Economics Says…
“The Fed typically looks through oil-price spikes, which don’t get passed through to core prices. We examined the impact on short-term inflation expectations in various scenarios, and don’t think the recent rise in oil prices presages a return of last year’s jumbo rate hikes.”
— Eliza Winger, economist
To read the full note, click here
Consumer sentiment has been generally subdued as inflation ebbs only slowly, and higher interest rates have made buying both everyday items and bigger purchases much harder. Data out earlier Friday showed US retail sales fell for a second month in March.
Even so, the university’s sentiment index climbed to 63.5 from 62 last month as current and expected conditions improved. The median estimate in a Bloomberg survey of economists called for a slight uptick to 62.1.
Buying conditions for durable goods improved as consumers noted some disinflation for cars. Still, about 42% of respondents blamed high prices for eroding their personal finances, the most since December.
Consistent with the March readings, recent bank collapses appeared to have little impact on sentiment. Confidence levels were similar whether or not consumers mentioned the failures, the report said.
–With assistance from Kristy Scheuble and Reade Pickert.
(Adds video with Hsu interview)
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