Inflation Goes From ‘Nonissue’ To National Obsession In Six Months

A gauge of US consumer confidence improved in March despite — and I don’t know how else to put this — a demonstrable lack of confidence among US consumers.

The Conference Board’s gauge printed an above-consensus 107.2, up from a downwardly-revised 105.7 in February (figure below).

Lynn Franco, Senior Director of Economic Indicators at The Conference Board, cited “strong employment growth” in a press release explaining the resilient headline index. The labor differential touched a new record high.

It was the first increase in three months, and consumers’ perceptions of current conditions improved markedly. The present situation gauge jumped 10 points over the month.

The same couldn’t be said for the expectations index, though. It deteriorated, falling to 76.6 from 80.8. Consumers mentioned surging gas prices and the war. Franco flagged “softening” buying intentions for big-ticket items in the face of generationally high inflation.

Those of you steeped in the data will note that buying perceptions in the University of Michigan’s survey are the worst in decades. The annotated figure (below, from Morgan Stanley’s Mike Wilson) makes the point.

The headline Michigan index currently sits at “levels usually reserved for recessions,” Wilson wrote Monday. Only twice during the past 50 years have US consumers been more concerned about reduced living standards due to inflation, according to the latest read on the survey.

Separately, a new Gallup poll found 17% of Americans citing inflation as the country’s worst problem. That was more than double January’s 8%, and the most since the 80s (figure below).

Gallup underscored just how rapidly inflation has become part of America’s collective national conscious. “Inflation began rising as a public concern last fall, after being a nonissue for Americans throughout 2020,” the color accompanying the poll results said, noting that inflation “registered no more than 2% of mentions in 2021 until October.”

In the same survey, Gallup sought to gauge public consternation around more than a dozen key national issues by querying respondents directly. 59% said they worried about inflation “a great deal.”

As Gallup put it, “inflation doesn’t dominate Americans’ perceptions of the most important problem facing the country today the way it did in the early 1980s, but it’s more top-of-mind than it’s been in over three decades and appears to be taking a toll on Americans’ broader economic confidence.”

That’s why the Fed is concerned about the expectations channel.

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3 thoughts on “Inflation Goes From ‘Nonissue’ To National Obsession In Six Months

  1. Here’s some thoughts from Swiss national bank on inflation:

    “However, the global level of interest rates is likely to remain low, Zurbruegg said, dampened by demographics, inequality and a strong demand for safe assets.

    “Monetary policy has no influence over these factors. Even more importantly, the focus of monetary policy is price stability and economic developments, and not curbing financial system vulnerabilities,” he said.”

  2. Sharks always circle back around to GDP growth or decline. Trump had weak results and it was obvious back in the fake election that Sleeping Joe was going to take the fragile global pandemic on a rocketship of astronomical growth. The GDP decline has been in the works for two decades and “if” trump is allowed the privilege to become our dictator, he isn’t likely to do anything useful, in Making America Great Once Again.

    Anyway, here’s a comment from some random dude, which isn’t me:

    “Higher inflation could bring more capital to real estate because the asset class is viewed as an inflation hedge, but PREA research shows that GDP growth is far more important to real estate than inflation, Mr. MacKinnon said.”

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