- US consumers anticipate prices to rise over the next five years at its slowest rate since the late 1970s, the University of Michigan said Friday.
- Respondents expect an annual inflation rate of just 2.2% over the next half-decade and 2.3% through 2020.
- The university’s consumer sentiment index notched its highest level in seven months, hitting 99.3 in December after reaching 96.8 last month.
- Consumers’ economic optimism is poised to climb even higher following the “phase one” trade deal between the US and China, Schwab Centre for Financial Research Vice President Randy Frederick said in a phone interview.
- Visit the Business Insider homepage for more stories.
US consumers expect inflation to rise over the next half-decade at its slowest rate since the late 1970s, the University of Michigan said Friday.
Americans surveyed by the university expect an annual inflation rate of just 2.2% over the next five years, the lowest level since the school introduced the question roughly four decades ago.
The one-year inflation expectation was revised lower for December to 2.3% from 2.4%, the lowest since the end of 2016.
The data may worry Federal Reserve officials who view price expectations as fuel for actual inflation. The central bank’s policy is meant to achieve a 2% inflation goal, yet the figure has fallen below that threshold since it was established in 2012.
The university’s consumer sentiment index rose to a seven-month high, hitting 99.3 in December after landing at 96.3 the previous month. The figure is also one point higher than the December 2018 reading.
Despite the political turmoil brought on by the House of Representatives’ impeachment hearings, only 2% of respondents mentioned the proceedings when citing economic expectations, the university said.
Consumers’ economic optimism was also likely propped up by fading economic uncertainty, Randy Frederick, Schwab Centre for Financial Research’s vice president, said. The “phase one” trade deal between the US and China eliminates a major source of geopolitical risk, and the sharp reversal of a summer recession warning bodes well for consumer sentiment, he added.
“The yield curve has uninverted and, secondly, the phase one trade deal happened. Those two headwinds are out of the way,” Frederick said in a phone interview. “If anything, that should boost consumer and investor confidence even more going forward.”
The next University of Michigan data release is scheduled for January 17, 2020 at 10 a.m. ET.
Now read more markets coverage from Markets Insider and Business Insider: