Consumers' inflation expectations are at a record low

A preliminary reading on consumer confidence in February showed that expectations for inflation are at a record low.

The University of Michigan’s consumer sentiment index showed inflation expectations 5-10 years ahead fell to a record low, at 2.4%.

The headline consumer-sentiment index was 90.7, but it had been expected at 92.3.

“While slowing economic growth was anticipated to slightly lessen the pace of job and wage gains, consumers viewed their personal financial situations somewhat more favourably due to the expectation that the inflation rate would remain low for a considerable period of time,” the survey’s Richard Curtin wrote.

He noted that should inflation rise towards the Fed’s 2% goal, wages would also have to increase to prevent a breakdown in real incomes.

According to the survey, consumers became less optimistic about the economy in the year ahead. But in the long run, their outlook remained unchanged.

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