Consumer Sentiment: Inflation Expectations Jump

Bottom Line:  The University of Michigan's consumer sentiment survey rose more than expected in early April, and year-ahead inflation expectations jumped sharply. Year-ahead inflation expectations rose from 3.6% in March to 4.6% in April, the highest since November. However, we are cautious about suggesting the reading is a trend-changer. Consumers' reports of year-ahead inflation expectations tend to be quite volatile and prone to swing based on headlines a given consumer may have seen just before the survey. Moreover, lower-income consumers, who feel the effects of inflation the most, reported rising sentiment. Consumers also reported lower prices for durable goods, and vehicles. And the long-run inflation expectations index was steady at 2.9%. Overall, consumer sentiment edged up in April but remains historically low as households struggle with uncertainty, especially related to inflation and interest rates.

The University of Michigan's Consumer Sentiment Index ROSE 1.5  to 63.5, BELOW the 3-month average of 64.17 and -2.6% BELOW the year-ago level. The Current Conditions Index ROSE 2.3  to 68.6, ABOVE the 3-month average of 68.53 but -1.2% BELOW the year-ago level. The Future Expectations Index ROSE 1.1  to 60.3, BELOW the 3-month average of 61.4 and -3.5% BELOW the year-ago level. Year-ahead inflation expectations ROSE 1  to 4.6, ABOVE the 3-month average of 4.1 but -0.8 BELOW the year-ago level. Long-term (5 years) inflation expectations were unchanged at 2.9, BELOW the 3-month average of 2.9 and -0.1 BELOW the year-ago level.