Inflation Expectations Slump Again In The US, To The Lowest Level Since 2021

Despite the fact that consumers remained relatively downbeat about the economy's prospects at the end of March, US year-ahead inflation expectations had declined further in March to the lowest level in nearly two years.

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Based on the final March reading from the University of Michigan, consumers expect prices to rise by 3.6% annually, a decline from 3.8% earlier this month and 4.1% in February. As far as they are concerned, costs are predicted to increase by 2.9% in the next five to ten years, according to data released on Friday.

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A Trade Algo survey of economists estimated that the sentiment index would be 63.3, down from 67 in February.

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As part of the survey, respondents were asked to rate how much negative news they were hearing about the economy. While the data collected through March 27 were pretty close to half the responses, nearly two thirds of those were received earlier in the month before Silicon Valley Bank failed.

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As Joanne Hsu, director of the survey, told Reuters in a statement on Tuesday, despite the turmoil in the banking sector this month, consumer sentiment remained largely unchanged, which was already exhibiting negative momentum prior to Silicon Valley Bank's collapse.

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There are a number of indicators that the consumer is increasingly anticipating a recession in the near future according to our data."

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It is estimated that, over the next year, two thirds of consumers expect "bad times" for the business environment, a further rise from last month but still far below the 79% recorded last June. The purchasing conditions for durable goods such as vehicles and appliances also decreased to their lowest level in over a year.

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In a report released earlier Friday, researchers from the University of Michigan reported that Consumer Spending moderated in February, and that the Federal Reserve's preferred inflation gauge, excluding food and energy, rose less than forecast. Nevertheless, the American Economic Review reported that personal finance expectations plunged to their lowest level since July.

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Despite a decline in unemployment expectations, consumers are still optimistic about their incomes and job prospects.

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There is still strong optimism among consumers when it comes to their incomes and job prospects - the share who anticipate higher unemployment in the next year has dropped to its lowest level,” Hsu said.