US consumer inflation expectations rise in Michigan survey

US CONSUMER inflation expectations in the short and long run increased in early November, while sentiment retreated to a four-month low amid rising borrowing costs.

Consumers expect prices will climb at an annual rate of 3 per cent over the next five to 10 years, up from 2.9 per cent in October and the highest in five months, the University of Michigan’s preliminary November survey showed on Friday (Nov 11). They see costs rising 5.1 per cent over the next year, compared to last month’s 5 per cent.

The sentiment index dropped to 54.7, worse than all forecasts in a Bloomberg survey, from 59.9 in October.

“Continued uncertainty over inflation expectations suggests that such entrenchment in the future is still possible,” Joanne Hsu, director of the survey, said in a statement.

As consumers feel the pinch of high interest rates and persistent inflation, buying conditions for durable goods slumped after surging the prior month.

The current conditions gauge decreased to 57.8 from 65.6. A measure of expectations fell to 52.7 this month from 56.2 in October.

The report showed that nearly half of consumers said inflation was eroding their living standards, leading many from lower- and middle-income families to change their spending habits.

“Higher-income consumers, whose outlooks were darkened by continued turbulence in stock and housing markets, will likely pull back their spending going forward,” Hsu said. “With overall sentiment remaining low, these factors highlight the risk of recession in the quarters ahead.”

Still, a key government measure of inflation showed on Thursday that consumer price growth cooled in October by more than forecast. If sustained, that could indicate the worst of the bite from inflation may be over. BLOOMBERG