Consumer sentiment has dropped sharply, month-over-month, and there’s really only one clear reason why.
Consumers’ inflation expectations are rising as a result of geopolitical instability in the Middle East and crude price spikes.
Inflation concerns remained high with the survey’s one-year inflation expectation at 4.6 per cent, the same as the preliminary figure and up from 3.4 per cent in February. The survey’s five-to-10-year inflation outlook was at 3.2 per cent from 2.9 per cent.
This is a pretty clear indication that the month-over-month drop in sentiment has something to do with inflation expectations driven by higher oil prices. And note, prior to the middle of February, oil prices looked to be rising along with the economy’s rebound. Then, instability in the Middle East really took off, and crude spiked.