As doubts about rising prices intensify, economists across the board have raised their inflation expectations for the U.S. in the coming year, while consumer inflation expectations for the coming year have risen to a 10-year high of 4.6%. Although the White House and the Federal Reserve Board (Fed) insist that the recent rise in consumer prices will be temporary, the apparent shift in inflation expectations is likely to be detrimental to the $4 trillion spending plan that President Biden seeks to promote.
In the U.S. stocks last week due to inflation concerns and selling pressure, this week Walmart (Walmart), Target (Target), Home Depot (Home Depot) and other retailers will announce last quarter’s earnings, investors will pay close attention to the director’s views on product prices, as well as whether to announce price increases.
Recently there have been more and more economists expect that before the beginning of next year, the United States inflation rate will be higher. According to Bloomberg’s latest monthly survey, economists revised upward to the end of the first quarter of next year a number of price pressure indicators, including the Consumer Price Index (CPI), the Personal Consumption Expenditure Price Index (PCE), as well as the PCE core price index, excluding food and fuel.
According to a Bloomberg survey of 71 economists conducted from May 7 to 13, the CPI will rise 3.8% in the second quarter of this year compared to a year ago, while the PCE price index will climb 3%. The latest survey, which is much higher than predicted at the beginning of the year, shows that economists are adjusting their forecasts to reflect factors such as supply shortages, transportation challenges, stronger demand, and trillions of dollars of fiscal and monetary policy support.
ING chief international economist Knightley said: “The U.S. economy’s supply capacity may not be able to keep up with demand growth, and supply shortages, from chips to labor supply, have become very apparent” “We believe that the inflation rate may remain in high gear for longer than the U.S. Federal Reserve expects. “
Fed officials believe that upward pressure on prices is temporary, and said that even if the inflation rate exceeds the target of 2%, still intends to maintain ultra-loose policy. But the Bloomberg survey and pointed out that the economists surveyed believe that until the 1st quarter of next year, Fed officials prefer the PCE core price index every quarter in more than 2%.
According to data released last week, the University of Michigan’s preliminary consumer confidence index for May plummeted to 82.8 from 88.3 last month, much lower than the most pessimistic economists forecast in the Bloomberg survey.
The survey also showed that consumers expect inflation to rise to 4.6% in the coming year, the highest in a decade, with 43% of respondents expecting prices to rise by at least 5%. Therefore, more consumers expect inflation to rise higher than the increase in income, posing a risk to consumer spending.
Curtin, who is in charge of the survey, said, “Consumer confidence fell sharply in early May because of rising inflation.” “Rising prices coupled with continued strong demand create the potential room for a psychological boost to inflation.”