Consumer Sentiment Wilts as Inflation Expectations Hit 12-Year High

Source: Economics Group of Wells Fargo Bank, N.A. Summary Consumer sentiment fell to its lowest level since May as inflation expectations shot up to the highest level since 2011. Rising pay and a rebound in the stock market may soften the blow, but consumer sentiment is clearly being dented by the reality of higher financing costs. Stocks and Pay Are Rising, but So Are Prices and Rates The University of Michigan’s Consumer Sentiment Index fell to 60.4 in November (chart). That marks the lowest point for sentiment since May, and it was lower than any of the 50 economists who submitted a forecast on Bloomberg. It is worth pointing out that the sky is not falling here. Current and expected finances both improved during the month amid a still steady labor market and a sharp upturn in equity markets since recent lows in October. The bummed-out vibe can be attributed to the fact that consumers are waking up to the reality of a much higher interest rate environment and renewed concerns about inflation. Those price expectations have been flagged by Fed Chair Powell in the past as a key input for policymakers. The 5-10 year inflation expectations number climbed to 3.2% in today’s release, that is the highest inflation expectations since 2011 when oil prices were north of $100/barrel and when gas prices were nearing $4/ gallon (chart). Year ahead inflation expectations also spiked after a brief reprieve the past several months, jumping 0.2 percentage points to 4.4% in November, the highest since April. READ FULL ARTICLE >>