Photo: Robert Couse-Baker / Flickr
Earlier this morning, we learned that the widely followed University of Michigan consumer confidence reading jumped to 83.1, a five-year high. This was driven by a jump in consumer expectations.However, one of the more interesting sub-components of the report was drop in inflation expectations.
“Inflation expectations fell in both the 1yr and 5yr space, with 1yr expectations falling to 3.1% from 3.3% and 5yr expectations falling to 2.6%, the lowest reading since March 2009!” exclaimed TD Securities’ Gennadiy Goldberg.
This is rather extraordinary. With the Federal Reserve embarking on unprecedented easy monetary policy, many experts have screamed warnings of inflation and even hyperinflation.
Then again, bears like SocGen’s Albert Edwards are reiterating their calls for deflation.
“Although I agree that Ben Bernanke’s ruinous polices will ultimately take us down the road to rapid inflation, I still think we will travel there via another visit of outright deflation fear,” wrote Edwards in a recent note to clients. “I expect US inflation expectations as measured by the bond market to decline and fall into line with 5-year consumer expectations as measured in the Michigan Survey.”