In July, the consumer’s outlook on inflation declined significantly due to a dramatic drop in gasoline prices and the growing belief in future rapid increases in housing and food prices.
According to the New York Federal Reserve’s Monthly Survey of Consumer Expectations, respondents expected inflation to rise at 6.2% over the following year and 3.2% for three years.
While these numbers remain high according to historical standards they represent a substantial drop in comparison with the 6.8% and the 3.6% respectively from the June survey.
According to Bureau of Labor Statistics, food prices increased 10.4% in June compared with the previous year. The prices are likely to increase 6.7% within the next 12 month, although that number is still higher than the June survey by 2.5 percentage points. This represents the greatest drop in data since June 2013.
The survey respondents also saw gas prices rising at only 1.5% over the next one year. That’s a decline of 4.2 percentage point from June.
AAA reports that the average price for regular gas is now 67c per gallon, but still remains higher than last year’s at 87c. Commodity prices are also falling.
The final projection is that home prices will rise by 3.5% compared to June’s 4.4%. It is the lowest expected gain since November 2020.
The five-year inflation outlook also fell, falling 0.5 percentage points to 2.3%.
This comes as inflation has reached its highest levels in over 40 years, and the Fed is raising interest rates to combat it. According to CME Group data, the central bank has increased benchmark rates for 2022 four times, totalling 2.25 percentage points. Market pricing shows a third consecutive 0.75 percent increase in September.
But, the New York Fed data from July may give policymakers cause to trim back, if in September not then later in this year. If the inflation data cooperates. So the Fed’s long-term goal of 2% inflation is well within the comfort range of the central bank, the projections in the survey are still high.
Michelle Bowman, Fed Governor of Michelle Bowman stated over the weekend that inflation is unlikely to drop anytime soon. She also said she sees no reason for it. a need to keep pushing rates higher. Mary Daly, President of the San Francisco Fed, echoed these sentiments and said that increases were “far away from being done”.
These comments were made after Friday’s BLS report. much higher numbers for payroll growth — 528,000 — and wages, with average hourly earnings jumping 5.2%.
New York Fed’s survey showed that household spending will slow down to 6.9% for next year. It’s a relatively high figure over the long-term, but still below the May record of 9%. 1.5% monthly decrease is the greatest in the history of the survey.
Consumers also grew slightly more optimistic on stock prices during a month that saw the S&P 500 soar 9%, with 34.3% now expecting higher prices over the next 12 months.
