- Consumer confidence in the US deteriorated in May
- Inflation expectations rose sharply
Fears related to inflation are rising very fast in the US, as exemplified by today's University of Michigan's consumer sentiment data, which showed a decrease to 82.8 in May from 88.3 in April. Today's reading came in well below analysts’ expectations of 90.4. “Consumer confidence in early May tumbled due to higher inflation,” Richard Curtin, director of the survey, said in the report. “Importantly, consumer spending will still advance despite higher prices due to pent-up demand and record saving balances.” he said. Inflation expectations for the year ahead surged to 4.6% from 3.4% and the 5-year outlook to 3.1% from 2.7%, the highest levels in a decade.
US consumer sentiment slumped in early May as Americans grew increasingly concerned about rising prices. Source: Bloomberg
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Inflation expectations rose to 4.6%, the highest in a decade. Source: Bloomberg via ZeroHedge
Rising inflation also meant that real income expectations were the weakest in five years. Further details of the publication revealed that the Current Economic Conditions Index declined to 90.8 from 97.2 and the Consumer Expectations Index edged lower to 77.6 from 82.7.
One can see that not only investors but ordinary US citizens have started to closely monitor inflation figures, despite the fact that this issue is downplayed by the FED. The Central Bank argues that elevated readings will merely be "transitory" since inflation expectations are "well anchored". However when looking at the inflation expectations figures it seems that households are noticing higher prices and are not necessarily "buying" the FED's assurances. Therefore it can be assumed that at least some of the FED members who are scheduled to speak next week may change their current rhetoric. Also next week’s FOMC Minutes may help gauge the Fed’s outlook further.
