Inflation expectations eased in May, as reported in the New York Federal Reserve’s Survey of Consumer Expectations. For the second month in a row, consumer inflation expectations eased according to the Michigan survey. The three-year outlook fell by 0.2 percentage points to 3%. Moreover, the five-year forecast slipped down to 2.6% from last month’s 2.7%. This trend could give the White House some good economic news to work with as it continues to work through a turbulent economy.
The New York Fed survey probably is most notable for its constancy. For one thing, it’s far less volatile than other measures, such as those from the University of Michigan and the Conference Board. Although the inflation outlook has improved, it’s still well above the Federal Reserve’s mandate of 2% annual inflation. Despite the challenges these figures represent, there may be some positive news for consumers’ inflationary feelings—as Evan Lutins reported recently.
In the face of these challenges, National Economic Council Director Kevin Hassett pointed to a number of encouraging trends during a recent appearance on CNBC’s “Squawk Box.” He argued that inflation is coming down from every angle.
“By every measure of inflation, it’s down by more than it’s been in more than four years,” – National Economic Council Director Kevin Hassett.
The increase in tariff revenues has been accompanied by a decrease in inflation. He added that this observation runs counter to popular narratives but is consistent with their administration’s view.
It appears that folks have adjusted their expectations downward when it comes to future costs. This is definitely true for medical care, college education, and rent increases. This would be a welcome harbinger of more stable economic conditions for consumers in the years ahead.
Labor market expectations have come up. Only 14.8% of respondents currently project job losses in the next 12 months, a drop of one-half percentage point. The chance of Americans being unable to make at least one debt payment in the next three months has fallen to its lowest level—13.4%. That’s the lowest it has been since January.
Respondents are bullish on the overall market. Indeed, 36.3% of them a year from now believe it will continue to increase, a jump of 0.6 percentage points from prior surveys.
The U.S.-China trade war begun by former President Donald Trump reached new heights. He raised universal tariffs on U.S. imports and imposed retaliatory duties against scores of countries. Second, as a result of this massive shortcoming, Trump’s administration set a 90-day negotiating window. This window will close in mid-July, after his “liberation day” declaration of April 2.