On Friday (November 10th) local time, the latest data released by the University of Michigan in the United States showed a significant rebound in consumer inflation expectations, with long-term expectations rising to their highest level in nearly 12 years.
The specific data shows that the one-year expected inflation rate of consumers in the United States in November recorded 4.4%, the highest level since April 2023, which is significantly higher than the range of 2.3% -3.0% in the two years before the COVID-19 pandemic. The market had expected this number to decline to 4%.
In addition, long-term inflation expectations - the expected inflation rate for the five to ten year period has further rebounded from 3% last month to 3.2%, the highest level since 2011, and the market had originally expected to remain unchanged at 3%. In contrast, the data in the two years before the COVID-19 pandemic was 2.2% -2.6%.
The report shows that although prices at gas stations have been steadily declining since late September, consumer expectations for both short-term and long-term gasoline prices have risen to their highest levels for the year.
The report also shows that the rebound in inflation expectations has dealt a new blow to consumer sentiment, with the initial consumer confidence index in November dropping from 63.8 last month to a six month low of 60.4. In addition, the current situation index and expected index have also dropped to their lowest levels since May.
Investigation Director Joanne Hsu wrote that although the financial situation has slightly improved, the combination of expectations of sustained high prices, high borrowing costs, and a weak labor market has dampened the prospects of consumer spending and economic growth continuing to strengthen.
Hsu added that concerns about high prices of durable consumer goods, cars, and residential properties have steadily declined since reaching their peak in 2022, but these improvements have all stagnated in 2023 as price concerns remain prominent for consumers and the degree of improvement is not significant enough.
Nearly one fifth of respondents said that unemployment will bring them more difficulties in the coming year than inflation. The latest employment report from the US government also shows that recruitment is only concentrated in a few industries, while the unemployment rate has climbed to its highest level since 2022.
The combination of rising inflation expectations and concerns about the sustainability of consumer spending highlights the serious challenges faced by Federal Reserve policymakers when discussing further interest rate hikes.
Shortly before the press release, Atlanta Fed Chairman Bostick stated that "the labor market is relaxing and wage pressures are easing." He believes that policymakers can bring US inflation back to target levels without further interest rate hikes.
But yesterday, Richmond Fed Chairman Barkin said that whether the Fed needs to raise interest rates again "remains to be seen".