Consumer Sentiment Plunges as Inflation Fears Surge
Americans are increasingly anxious about the US economy, particularly concerning inflation. The latest University of Michigan consumer sentiment survey reveals a sharp decline in February's preliminary reading to its lowest level in seven months. One-year inflation expectations have spiked from 3.3% to 4.3%, representing the highest reading since November 2023.
Economist Ruben Abargues suggests that the surge in inflation expectations reflects concerns about the potential stagflationary effects of government policies. However, Chicago Fed President Austan Goolsbee emphasizes the need to focus on market-based data.
While consumer surveys indicate short-term inflation concerns, market-based measures of long-run inflation remain anchored near the Federal Reserve's target of 2%. The 10-year breakeven inflation rate, for instance, stands at 2.42%, within a stable range of 2% to 2.4% in the past two years.
Overall, the February preliminary consumer sentiment reading dropped to 67.8, significantly lower than January's level and economists' expectations. The current conditions index, evaluating consumer demand and economic growth, declined by 7.2% due to a perceived negative impact of tariff policies.