According to data from the University of Michigan, US consumers expect inflation to continue to decline next year. These expectations have reached their lowest level since late 2020.
Decline in Inflation Expectations
The University of Michigan’s monthly consumer sentiment index survey showed that households’ one-year inflation expectations fell to 2.8% in August from 2.9% in July, the lowest level since December 2020. The five-year outlook for price growth remained steady at 3.0%.
Improvement in Consumer Sentiment
The broader survey found a modest improvement in consumer sentiment this month, a shift that could have important political implications as the U.S. presidential election approaches on November 5. The overall sentiment index rose to 67.9 in August, breaking a four-month decline from an eight-month low of 66.4 in July. The increase in sentiment was driven primarily by those who identify as political independents.
Political Implications
Hsu also noted that these models show a 'shift' in election expectations this month, with Vice President Kamala Harris emerging as the Democratic presidential nominee after President Joe Biden dropped out of the race. In July, University of Michigan data showed that 51% of consumers expected Republican nominee Donald Trump to win the election, compared with 37% for Biden. That has since reversed, with 54% expecting Harris to win, compared with 36% for Trump.
Thus, the steady decline in inflation expectations and improvement in consumer sentiment could play a significant role in the upcoming presidential elections in the US.
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