Where Is The Consensus For A Looming Inflationary Liftoff

Money, Profit, Finance, Business, Return, Yield

With government cash being shoveled into personal and corporate bank accounts, US consumers have reported that they are more optimistic about the state of the economy. Before that, they went on a spending binge as stated unequivocally by historic retail sales figures. Why, then, so much higher spending than improved happiness and certainty while going about it?

The University of Michigan’s consumer survey index increased to 86.5 for the month of April 2021, up from 84.9 (revised) during March. Last month’s estimate had shown the bigger jump with the arrival of Uncle Sam’s check writing; just 76.8 in the winter freeze of February.

While up from the cold, hardly in the same territory as the scorch of retailer registers barely able to keep up printing consumer receipts. The expectations component of the Michigander catalog was flat March to April, and isn’t even as much off last year’s bottom as the headline.

But none of this is actually the headline for entire set of data which the UofM has helpfully pieced together nearly half a century. The “aha” in it, if you will, was the inflation expectations series. According to their latest survey panels of likely shoppers, these government-fueled spendthrifts (altogether on average) now in April believe that one year from today the inflation rate is likely to be somewhere around 3.7%.

That’s not just up from 3.1% as stated during March, it’s the highest expected short run inflation going back to 2012. Like the PPI, another decade high in some part of the overall price equation. And according to Economists, expectations should be a big part.

Gasoline prices play a key role in consumer expectations, of course, as would the base effects of being compared to gasoline and oil prices having plunged in the year earlier period. After all, that’s why you see 2011 to early 2012 one-year inflation expectations shown above at similar rates to 2021.

Unlike ten years ago, however, back then consumers apparently felt it would stick around for a while – as in, actual (sustained) inflation. Even when Ben Bernanke told them it probably wouldn’t beyond the interim, the 5-year forward inflation outlook, according to the Michigan survey, was still anchored around the same as the pre-crisis period. Both consumers and Bernanke apparently felt it would happen if given enough time.

It’s appreciably lower now despite the big pickup in the shorter run, down in April, actually, from March.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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