Home Guides & Resources chevron_right Economy and the Markets Chart of the Week: Consumers Expect Higher Inflation—Will They Be Right? Published June 6, 2022 Jeffrey DeMasoPortfolio Manager Filled up on gas lately? Then you know: Inflation has been hurting consumers. What makes the recent bout of rising prices so irksome is that it was largely unexpected. For nearly a decade, the New York branch of the Federal Reserve has been asking consumers how high they think inflation will be over the next year. As you can see in the chart, respondents have typically predicted it would be around 3%. And until recently, they were, for the most part, overshooting the target—from 2013 through early 2020, inflation averaged 1.5%. That all changed coming out of COVID-19 shutdowns, with demand rebounding while supply chains fell apart. A war in Europe and lockdowns in China only made the situation worse. Coming into 2021, consumers were still expecting inflation of around 3%. But that year’s inflation clocked in at 7%. Consumers weren’t just hit hard. They were sucker-punched. Now they’re adjusting their thinking on inflation. As of April (the most recent results available), those surveyed by the New York Fed now expect to see inflation of 6.3% over the coming year. Will inflation come down to meet their expectations or will consumers again be surprised by price hikes? Only time will tell, but some policymakers have expressed the opinion that inflation has peaked. Note: Consumer inflation expectations line represents median one-year ahead expected inflation rate. Actual inflation is represented by year-over-year consumer price index (not seasonally adjusted). Sources: U.S. Bureau of Labor Statistics, Federal Reserve Bank of New York Survey of Consumer Expectations. This material is distributed for informational purposes only. The ideas and opinions contained herein should not be viewed as recommendations or personal investment advice. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed. Our statements and opinions are subject to change without notice. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged. Past performance is not an indication of future returns. Tax, legal and insurance information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice, or as advice on whether to buy or surrender any insurance products. Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice, nor sell insurance products. Always consult a licensed attorney, tax professional, or licensed insurance professional regarding your specific legal or tax situation, or insurance needs. For a summary of Adviser Investments’ advisory services and fiduciary responsibilities to our clients, please review our Form CRS here. © 2022 Adviser Investments, LLC. All Rights Reserved. Tags: Chart of the WeekconsumerexpectationsinflationJeff DeMaso