Consumer inflation forecasts in the US dropped in September, while sentiment rose.

In September, consumers’ expectations for short-term inflation dropped to a one-year low, and the forecast for the next five years also improved, quelling concerns that the Federal Reserve may hike interest rates by a full percentage point next week. The survey from the University of Michigan was released on Friday after statistics this week revealed an unexpected spike in consumer prices in August, which sparked worries that high inflation was becoming long-standing.

One-year inflation estimates as measured by the University of Michigan survey decreased from 4.8% in August to 4.6%, the lowest level since September 2021. For the first time since July 2021, the survey’s five-year inflation outlook dropped to 2.8%, under the 2.9%-3.1% range.

Lower gas prices helped to slightly improve consumer morale in September, according to a study from the University of Michigan. This month, the total consumer mood index’s preliminary estimate increased slightly from 58.6 in August to 59.5. Reuters polled economists, who predicted a September preliminary reading of 60.0.

Economists and market experts focused on the monthly readout of the consumer price index earlier this year as prices for basic necessities like gas and groceries began their inevitable increase. They were looking for clues as to how entrenched inflation was becoming.

However, it is too soon to consider the war on inflation won. Russia’s choking of gas supplies to its western neighbors is contributing to the energy crisis in Europe, which has the potential to raise prices globally. The labor markets are still robust, and wages have been increasing, albeit more slowly than in recent months. Additionally, future strikes in some important sectors, like as rail freight, might disrupt supply chains once more and raise prices for food and other necessities.

 

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