US Year-Ahead Inflation Views Retreat Again, Lowest Since 2021 By Bloomberg

(Bloomberg) — US year-ahead inflation expectations receded further at the end of March to the lowest in nearly two years, though consumers remained relatively downbeat about the economic outlook.

Consumers expect prices will climb at an annual rate of 3.6% over the next year, down from 3.8% earlier in the month and 4.1% in February, according to the final March reading from the University of Michigan. They see costs rising 2.9% over the next five to 10 years, data out Friday showed.

The sentiment index decreased to 62 from 67 in February as consumers’ assessment of both current and expected conditions worsened. The median estimate in a Bloomberg survey of economists called for a reading of 63.3.

The survey collected responses through March 27, but nearly two thirds were received earlier in the month before Silicon Valley Bank failed, according to the report. The share of consumers hearing negative news about the economy was unchanged from February.

“This month’s turmoil in the banking sector had limited impact on consumer sentiment, which was already exhibiting downward momentum prior to the collapse of Silicon Valley Bank,” Joanne Hsu, director of the survey, said in a statement.

“Overall, our data revealed multiple signs that consumers increasingly expect a recession ahead.”

About two thirds of consumers expect “bad times” for business over the next year, up from last month but still well below the 79% recorded last June. Buying conditions for durable goods like cars and appliances fell to the lowest since December.

Data out earlier Friday showed the Federal Reserve’s preferred inflation gauge excluding food and energy rose by less than forecast in February and consumer spending moderated. Even so, personal finance expectations retreated to the lowest since July, the university said.

Consumers still expect strength in their incomes and job prospects – the share anticipating higher unemployment in the next year dropped to the lowest in six months.

“However, if the current turbulence in the banking sector leads to tightening credit conditions for consumers, sentiment declines are likely to follow,” Hsu said.