Consumers are getting more optimistic about future inflation, while remaining uncertain about the economy, according to the preliminary September estimate from the University of Michigan released Friday.
While overall sentiment about the current economy ticked up slightly to 59.5 from 58.2, it is still down 18% from a year ago.
Inflation expectations, however, improved with the median year-ahead inflation rate falling to 4.6%, the lowest reading since last September. At 2.8%, median long run inflation expectations dipped below the 2.9-3.1% range for the first time since July 2021.
Inflation has been the top economic concern of Americans for some time now, with the annual consumer price index for August showing prices rising at an 8.3% clip. However, that is down from 9.1% earlier in the summer, largely due to a sharp drop in the price of gasoline.
Political Cartoons on the Economy
The Federal Reserve meets next week to consider monetary policy with forecasts for a 75 basis point hike after a similar increase in July. Recent hawkish statements by Fed officials have led to a sharp selloff in the stock market as traders come to grips with the idea of Fed tightening into next year.
“With the labor market and pace of core inflation having shown more resilience in recent months than we expected, the risks of the Fed continuing to have to tighten further are very much skewed to higher rates,” said David Page, head of macro research at AXA Investment Managers.
Consumer surveys have been mixed of late, with some showing Americans growing more pessimistic about the economy and others showing the opposite. However, consumers do continue to spend, although some indications are that they have been shifting their purchase habits in the face of high inflation.
Democrats, urban residents, those with annual incomes above $100,000, aged 18-34, and college-educated respondents continue to show scores significantly higher than the total population. Republicans, the unemployed, those with annual incomes below $50,000 and rural Americans had significantly lower index scores.