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Despite rising gas prices, Americans feel more optimistic about the future of inflation | Business CNN

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A customer looks at LG washers and dryers at an RC Willey home furnishings store in Draper, Utah, U.S., Monday, Aug. 28, 2023.

Washington D.C.

Increase in gas prices have not taken their toll on the American consumer yet, amid growing optimism that inflation is easing, according to the latest consumer confidence survey from the University of Michigan.

The latest university consumer survey released Friday showed that Americans’ expectations of inflation rates Over the next year it fell at a rate of 3.1% in September, down from 3.5% the previous month, marking “the lowest since March 2021 and just above the 2.3-3 range. 0% observed in the two years prior to the pandemic,” according to a statement.

Meanwhile, inflation expectations over the next five to 10 years fell to a rate of 2.7%, “falling below the narrow range of 2.9-3.1% for only the second time in the last 26 months.” .

That’s good news for the Federal Reserve, which is closely monitoring Americans’ views and expectations about inflation as it continues its historic fight against inflation. Americans appear confident that inflation will decline to levels they have seen in the past, but if consumers become accustomed to higher prices, that complicates the Federal Reserve’s task of slowing inflation.

“The decline in five- to 10-year inflation expectations… is a very welcome development,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in an analyst note. “We have argued for some time that a clear reduction in inflation expectations was necessary, and this decrease is a big step towards normalization.”

Although Shepherdson cautioned that the latest reading is a preliminary figure, he notes that “it could be revised upward in the final reading as people respond to higher gasoline prices. But for now everything looks good.”

gas prices They are highly visible indicators of inflation, and high prices easily damage consumer morale. Confidence fell to its lowest level on record last summer, when gasoline prices topped $5 a gallon and inflation hit a four-decade high. The national average for regular gasoline stood at $3.87 a gallon on Friday, according to AAA, seven cents higher than a week ago and 17 cents higher than the same day last year.

Overall consumer confidence, tracked by the University of Michigan, fell in September from the previous month by 1.8 points, mainly due to more pessimistic attitudes about the current state of the economy. The survey’s index of current economic conditions deteriorated from a reading of 75.7 in August to 69.8 this month.

While Americans’ views on the future of the economy improved somewhat in September, consumers are not necessarily feeling optimistic and concerns about the possibility of a government shutdown.

“Both short- and long-term expectations for economic conditions improved modestly this month,” Joanne Hsu, director of Consumer Surveys at the University of Michigan, said in a statement.

“On net, consumers remain relatively undecided about the trajectory of the economy. So far, few consumers have mentioned the possible federal government shutdown, but if the shutdown materializes, consumers’ opinions of the economy will likely decline, as was the case just a few months ago when the debt ceiling was nearly breached. “, said. referring to the drop in consumer confidence in May, when congressional lawmakers fought to raise the federal government’s debt ceiling, nearly triggering a U.S. default.

While a combination of high gas prices and a government shutdown could dampen Americans’ moods, there is a chance that gas prices could decline in the fall due to weaker demand.

“Oil costs are putting upward pressure on pump prices, but the increase is tempered by much lower demand,” AAA spokesman Andrew Gross said in a statement. “The decline in the number of people refueling is typical: schools are back in session, days are getting shorter and the weather is less pleasant. But the usual decline in pump prices is being hampered for now by these high oil costs.”

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