Due to the slow recovery of the economy from the COVID-19 pandemic, concerns about inflation caused consumer confidence to drop sharply from 85.5 in June to 81.2 in July.
According to the University of Michigan Consumer Confidence Index, the expected figure is 80.8. The current reading is 81.2
It was the lowest since February.
The reason for the decline is that consumers seem to be worried about recent inflation, as expectations for the next year have risen from 4.2% in June to 4.7%, and are still higher than 10-year levels. Despite the news, Americans still believe that the inflation rate will remain at 2.8% in the next five years.
Key inflation indicator jumped 3.5%, fastest increase in 30 years https://t.co/rOhbcDYhf6 pic.twitter.com/hCisyfN7gU
— New York Post (@nypost) July 30, 2021
“Although most consumers expect inflation to be temporary, there is growing evidence that inflation storms may develop in the near future,” said Richard Curtin“The improvement in consumer financial conditions has greatly reduced consumers’ resistance to price increases,” Curtain added.
“Although the company’s own supply and labor shortage are very willing to raise prices and wages, consumers and companies currently believe that their actions are temporary adjustments due to the pandemic,” Curtain said.
The survey’s barometer fell from 88.6 to 84.5, the lowest reading since August 2020. Customer expectations have also fallen from 83.5 in June to 79.0 in July.
Curtain said that consumer prices have risen at the fastest rate since 2008, so it’s no surprise that inflation is so concerned about consumers.
Latest news: A key price index showed that inflation growth in June was lower than expected.
PCE rose 0.4%-lower than expected 0.6%. This is the most closely watched measure by the Fed. https://t.co/rJG9usgwQz
— Axios (@axios) July 30, 2021
“This consumer response is unique and completely different from the inflationary psychology of the 1970s. In that earlier era, prosperity was driven by consumers’ willingness to buy in advance to avoid future price increases. Now the coming boom It will be due to increased income and employment making price increases easier to manage,” Curtain said.
The following are the items that really push up inflation:
Car rental 87.7% (year-on-year change)
Used cars 45.2%
Natural gas 45.1%
Washing machine 29.4%
Airfare 24.6%
Move 17.3%
Hotel 16.9%
Furniture 8.6%
Bacon 8.4%
TV 7.6%
Fruit 7.3%
Shoes 6.5%
Fresh fish 6.4%
New car 5.3%
Milk 5.6%
Rent (OER) 2.3%— Heather Long (@byHeatherLong) July 13, 2021
However, some economists are not too worried about inflation. “We have seen some substantial price readings in recent months and may see more, but we believe this will be temporary,” said Nathan Road.
Many inflation concerns boil down to pandemic-related demand, as the country reopened its downtime and people decided to go on vacation.Biden Economic Advisory Committee It is estimated that 60% of the inflation in June was caused only by car prices, and the other big chunk came from air travel, as people resumed their pre-pandemic lives.
