Interest Rate Roundup

Friday, May 16, 2008

University of Michigan survey: Confidence down, inflation expectations off the charts

Yesterday I posted about the Fed's current dilemma: The growth numbers don't look good, but the inflation numbers are off the charts. That trend continued into May, according to the latest figures from the University of Michigan. The group's confidence index dropped to 59.5 from 62.6 in April. That's the lowest reading since June 1980. Indices that track both current conditions and the outlook for the future slumped.

Here's the kicker: An index that measures inflation expectations for the next year jumped. Consumers now expect inflation to run at a 5.2% page over the coming 12 months. That's up from 4.8% in April and the highest reading going all the way back to February 1982 (a tie). Five-year forward inflation expectations climbed to 3.3% from 3.2%. That's the highest reading since August 1996 (a tie).


  • FWIW, my inflation expectations are not "well anchored." I track every penny and I peg the rise in the cost of living for a family at closer to 7% yoy. That's a lot against stagnant incomes.

    Growing money supply at > 1.5 times gdp for 20 years is bound to cause problems - unpayable debts and/or inflation. Looks like Japan WITH CPI inflation to me. More trouble ahead.

    BTW, great blog. I enjoy you insights.

    By Anonymous Anonymous, at May 16, 2008 at 3:03 PM  

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