September 26, 2023

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Despite rising gas prices, Americans are feeling more optimistic about the future of inflation

Despite rising gas prices, Americans are feeling more optimistic about the future of inflation

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A customer looks at LG washers and dryers at the RC Willey Home Furnishings store in Draper, Utah, U.S., on Monday, August 2019. 28, 2023.

Washington, DC

Gas prices rise It has not negatively affected the American consumer yet, amid growing optimism that inflation is declining, according to the latest consumer confidence survey from the University of Michigan.

The university’s latest consumer survey released on Friday showed that Americans’ expectations for… Inflation rates Next year it fell to a rate of 3.1% in September, down from 3.5% the previous month, representing “the lowest level since March 2021 and slightly above the 2.3-3.0% range seen in the two years prior to the pandemic,” according to a statement.

On the other hand, inflation expectations in the next five to 10 years fell to an average of 2.7%, “falling below the narrow 2.9-3.1% band for only the second time in the past 26 months.”

This is welcome news for the Federal Reserve, which is closely monitoring Americans’ views and expectations about inflation as it continues its historic battle with inflation. Americans appear confident that inflation will drift back to levels seen in the past — but if consumers get used to higher prices, that complicates the Fed’s job of slowing inflation.

“The decline in five- to 10-year inflation expectations…is a very welcome development,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in an analyst note. “We have argued for some time that the clear downward shift in inflation expectations was overdue, and this decline is a big step towards normalization.”

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Although Shepardson cautioned that the latest reading is a preliminary number, he points out that “it could be adjusted in the final reading as people respond to higher gas prices. But for now it looks good.”

Gas prices They are very clear indicators of inflation, and high prices easily spoil the mood of consumers. Sentiment fell to an all-time low last summer when gas prices topped $5 a gallon and inflation reached its highest level in four decades. The national average for regular gasoline was $3.87 a gallon on Friday, according to AAA, seven cents higher than a week ago and 17 cents higher than the same day last year.

Overall consumer sentiment tracked by the University of Michigan in September fell from the previous month by 1.8 points, mostly due to more pessimistic attitudes about the current state of the economy. The survey’s index of current economic conditions deteriorated from a reading of 75.7 in August to 69.8 this month.

While Americans’ views about the future of the economy improved somewhat in September, consumers are not necessarily feeling as optimistic – and concerns are beginning to emerge about… Possible government shutdown.

“The short- and long-term outlook for economic conditions improved modestly this month,” Joan Hsu, director of consumer surveys at the University of Michigan, said in a statement.

“On the net, consumers remain relatively undecided about the path of the economy,” she said. “So far, few consumers have mentioned a potential federal government shutdown, but if a shutdown occurs, consumer opinions about the economy will likely decline, as was the case a few months ago.” “Just when the debt ceiling was close to being breached,” he said, referring to the decline in consumer sentiment in May when lawmakers in Congress battled over raising the federal government’s debt ceiling, almost sending the US into default.

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While higher gas prices and a government shutdown could affect Americans’ moods, there is a possibility that gas prices could decline in the fall due to weak demand.

“Oil costs are putting upward pressure on terminal prices, but the rise is mitigated by much lower demand,” AAA spokesman Andrew Gross said in a statement. “A decline in the number of people fueling up is typical, as schools go back to work, days get shorter, and the weather becomes less pleasant. But the usual decline in gas station prices is currently being held back by higher oil costs.