Business Maverick: US Year-Ahead Inflation Expectations Fall to Lowest Since 2021

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US short-term inflation expectations unexpectedly declined to the lowest level in more than a year and consumer sentiment picked up, helped by falling gasoline prices.

Consumers expect prices will climb at an annual rate of 4.6% over the next year, down from the 4.9% expected a month earlier, to the lowest since September 2021, according to the preliminary December reading from the University of Michigan. Long-term inflation expectations held at 3%.

“Consumers’ concerns over high prices in a variety of contexts have eased somewhat over the last month — though these concerns still remain substantially higher than a year and a half ago —showing that the decline in year-ahead inflation expectations was not solely an artifact of current gas prices,” Joanne Hsu, director of the survey, said in a statement.

The report showed the median expected change in incomes rose to the highest in 15 years, but half of all respondents said they expect inflation to outstrip those gains over the coming year. The current conditions gauge increased to 60.2 from 58.8. A measure of expectations rose to 58.4 this month from 55.6 in November.

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