George Frey/Bloomberg/Getty Images
A customer looks at LG washers and dryers at an RC Willey home furnishings store in Draper, Utah, USA, on Monday, August 28, 2023.
Washington, D.C. CNN –
Rising gasoline prices have not yet hurt American consumers, while optimism is growing that inflation is easing, according to the latest University of Michigan consumer sentiment survey.
The university’s latest consumer survey, released Friday, found that Americans’ inflation expectations for the coming year fell to 3.1% in September, down from 3.5% the previous month, which was “the lowest level since March 2021 and.” just over 2.3%”. The range was 3.0% in the two years before the pandemic, according to a statement.
Meanwhile, inflation expectations fell to a rate of 2.7% over the next five to 10 years, falling below the narrow 2.9% to 3.1% range for “only the second time in the past 26 months.”
This is welcome news for the Federal Reserve, which is closely monitoring Americans’ views and expectations on inflation as it continues its historic fight against inflation. Americans appear confident that inflation will fall to levels they have experienced in the past – but as consumers become accustomed to higher prices, that will complicate the Fed’s job of curbing inflation.
“The decline in five- to 10-year inflation expectations … is a truly welcome development,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in an analyst note. “We have been arguing for some time that a significant reduction in inflation expectations is overdue, and this decline is a big step towards normalization.”
Although Shepherdson cautioned that the latest reading was a preliminary number, he noted that “it could be revised upwards in the final reading as people respond to higher gas prices.” But for now, things are looking good .”
Gas prices are highly visible indicators of inflation, and high prices easily dampen consumer sentiment. Sentiment fell to its lowest level on record last summer as gasoline prices topped $5 a gallon and inflation hit a four-decade high. According to AAA, the national average for regular gasoline was $3.87 per gallon on Friday, seven cents more than a week ago and 17 cents more than the same day last year.
Overall consumer sentiment, as measured by the University of Michigan, fell slightly by 1.8 points in September from the previous month, largely due to a gloomier view of the current economic situation. The survey’s current economic situation index deteriorated from a reading of 75.7 in August to 69.8 this month.
While Americans’ views on the future of the economy improved somewhat in September, consumers are not necessarily optimistic – and concerns are beginning to emerge about the possibility of a government shutdown.
“Both short-term and long-term economic expectations improved slightly this month,” Joanne Hsu, director of consumer surveys at the University of Michigan, said in a news release.
“On the Internet, consumers remain relatively cautious when it comes to economic developments. So far, few consumers have mentioned the potential federal government shutdown, but if the shutdown comes to fruition, consumers’ views of the economy will likely decline, as they did just a few months ago when the debt ceiling was on the verge of breaching “, she said. He was referring to the plunge in consumer sentiment in May when members of Congress argued over raising the federal government’s debt ceiling, which almost led to a U.S. default.
While a combination of increased gas prices and a government shutdown could weigh on Americans’ sentiment, there is a possibility that gas prices will fall in the fall due to weaker demand.
“Oil costs are putting upward pressure on pump prices, but the increase is being tempered by much lower demand,” AAA spokesman Andrew Gross said in a statement. “It is typical that people are becoming less energized as schools reopen, days become shorter and the weather becomes less pleasant. But the usual decline in pump prices is being slowed by these high oil costs for the time being.”