Aug 14, 2023 - Economy

U.S. consumer inflation expectations drop

Data: Federal Reserve Bank of New York; Chart: Axios Visuals

There's more good news on the inflation front: Consumers continue to expect inflation will recede in the years ahead.

Why it matters: It's the latest sign that Americans do not believe high inflation will be a mainstay of the economy, which would have made inflation more difficult to stamp out.

Driving the news: The median consumer expected inflation will be 3.5% in the year ahead, a sharp drop from the 3.8% they anticipated in June, according to the New York Fed. That's still above the 2.5% anticipated before the inflation surge, but well below the peak 6.8% they expected last year.

  • Over the next three years, consumers anticipate inflation will be 2.9%, down 0.1% from the prior month.
  • Those declines came alongside year-ahead expectations for smaller price increases for gas, food, medical care, the cost of college and rent.

Of note: The mean unemployment expectation — i.e. the mean probability that the U.S. unemployment rate will be higher one year from now — fell by 1 percentage point in July to the lowest reading since April 2022.

The bottom line: Consumers expect inflation to continue to recede alongside a healthy job market.

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