On Friday (October 13th) local time, the latest data released by the University of Michigan in the United States shows that consumers' short-term inflation expectations have rebounded significantly, reflecting a sharp deterioration in Americans' views on prices and finance.
The specific data shows that the one-year expected inflation rate of American consumers in October recorded 3.8%, the highest level since May 2023, which is significantly higher than the range of 2.3% -3.0% in the two years before the COVID-19 pandemic. The market had expected this figure to be equal to the 3.2% in September.
In addition, long-term inflation expectations - the expected inflation rate for the five-year to ten-year period has rebounded from 2.8% last month to 3%. The market had originally expected to remain unchanged at the 2.8% level, with 25 months remaining between 2.9% and 3.1% in the past 27 months. In contrast, the data in the two years before the COVID-19 pandemic was 2.2% -2.6%.
The rebound in inflation expectations led to the initial consumer confidence index in October dropping by more than 5 points from 68.1 last month to 63.0, the largest monthly decline since June last year. The market had originally believed that the data would only slightly drop to 67.2. In addition, the decline in the current and expected indices exceeded expectations.
Survey Director Joanne Hsu wrote that after two consecutive months of little change, the consumer confidence index fell by about 7% in October, with a decrease of about 15% in personal financial evaluation indicators, mainly due to a significant increase in concerns about inflation.
Hsu added that about 49% of consumers say that high prices are eroding their living standards, a significant increase from 39% last month and approaching the highest level in July 2022.
According to data released by the US Department of Labor on Thursday, the consumer price index (CPI) rose 0.4% month on month and 3.7% year-on-year after the September quarter adjustment, both exceeding market expectations. In the sub item, food prices increased by 0.2% month on month and 3.7% year-on-year; Energy prices increased by 1.5% month on month and decreased by 0.5% year-on-year.
Although the central bank is more concerned about removing the core CPI of fuel and food, Hsu pointed out that households are most concerned about the high costs of groceries and fuel. He also emphasized that consumers still believe that the deterioration of the current economic situation will not continue, and almost all groups have experienced setbacks, reflecting the sustained negative impact caused by high prices.
Shortly before the release, Philadelphia Fed Chairman Huck stated that "the Fed can stop raising interest rates while price pressures continue to weaken." However, former St. Louis Fed Chairman Brad stated that if inflation starts to rise again, the central bank may have to raise interest rates to 6.5%.
Brad said, "The market underestimates the risk that the process of declining inflation will stagnate or completely stop, and core inflation rates will start to rise again. This will trigger a new round of panic among decision-makers - have they taken enough action