US Economic Concerns Rise Amidst Inflation Surge
A new University of Michigan consumer sentiment survey reveals a sharp decline in optimism, reaching a seven-month low. Inflation concerns drive these sentiments, with preliminary February expectations jumping to 4.3% from 3.3%.
This significant increase in inflation expectations marks the highest level since November 2023 and two consecutive months of substantial growth. The survey also recorded only the fifth time in 14 years that such a large one-month rise in year-ahead inflation expectations occurred.
Analysts attribute the rise in inflation fears to concerns over "potential stagflationary effects" of President Trump's policies. However, Federal Reserve Bank of Chicago president Austan Goolsbee emphasizes the importance of focusing on market-based data, particularly long-run inflation expectations.
The 10-year breakeven inflation rate remains relatively stable at 2.42%, indicating that long-term inflation expectations are anchored within the targeted range.
Overall, the preliminary February consumer sentiment index fell to 67.8, driven by a decline in buying conditions for durables and concerns over tariff policy.
Despite the negative sentiment, the January jobs report suggests a solid labor market with declining unemployment and gains across sectors.