Latest news with #MichiganSurveyofConsumers
Yahoo
11 hours ago
- Business
- Yahoo
Price Fears Easing Amid Tariff Negotiations
Consumer worries over price increases eased in May as inflation expectations fell by the largest margin since 2023 in the latest New York Federal Reserve survey of consumers. Year-ahead inflation expectations came in at 3.2% in May, reflecting declines in similar consumer surveys. The Federal Reserve monitors inflation expectations when setting interest-rate policy, as consumer attitudes over prices can help influence the path of inflation. Economists have said that while consumers are feeling rotten about how tariffs may affect prices, their attitudes have improved as more news over pauses in tariffs and trade negotiations trickles tariff threats easing and reports of trade negotiations trickling in, consumers are worrying less about the threat of inflation from the trade tensions of recent months. After surging higher in March and April over worries that tariffs will drive up prices, consumer inflation expectations in May declined in the New York Federal Reserve's Survey of Consumer Expectations. Consumers expect price increases in the year ahead to come in at 3.2%, a drop by 0.4 percentage point from last month's survey, the largest decline in inflation expectations since December 2023. They also saw inflation falling at three and five years out. The decline in inflation expectations mirrors similar sentiment detected in other consumer surveys, which improved as some tariffs are paused and negotiations between trade partners begin to ramp up. The Federal Reserve closely follows inflation expectations when considering interest-rate decisions, because consumer behavior can help affect the direction of price increases. Consumers who expect prices to go up often act in ways that help make that a reality. After President Donald Trump began slapping tariffs on trade partners after taking office this year, inflation expectations shot higher. The closely watched Michigan Survey of Consumers saw year-ahead inflation expectations move as high as 6.6% in the final May survey. Inflation expectations reached 3.6% in the March and April surveys of the New York Federal Reserve before falling in May. The improving expectations come as tariff policy has seesawed, but last month's survey takes into account the May 12 action by Trump to temporarily reduce tariffs on China to 30% from 145% amid talks then between U.S. and Chinese officials. Economists said that while tariffs may have put a scare in some consumers, that hasn't shown up in economic data, with retail sales remaining healthy and inflation moving lower in the latest April data. While trade headlines can spook consumers, they may not be having a lasting impact, wrote BMO Chief Economist Douglas Porter on May's consumer surveys. 'There's little debate that the heavy trade clouds will linger, but there is a growing sense that markets and the economy can deal with that uncertainty better than initially expected,' Porter wrote. While consumers may be feeling a bit less worried about tariffs, it will take more good news on tariffs to keep the vibes going, wrote Oren Klachkin, a financial market economist for Nationwide. 'Consumers' inflation expectations will likely remain susceptible to forthcoming tariff news,' Klachkin wrote. Read the original article on Investopedia
Yahoo
16-05-2025
- Business
- Yahoo
Tariff Deals Aren't Easing Consumer Concerns Yet
The Michigan Consumer Sentiment Survey showed a surprising decline in May as tariff-related worries continued to sour public opinion around the economy. The latest survey provided preliminary results for May, and reflects the period after President Donald Trump paused tariffs on some nations in April. However, the results only covered two days after the U.S. and China announced a trade deal earlier this sentiment fell for the fifth straight month, and President Donald Trump's decision to reverse some tariffs has not improved the public mood. The Michigan Consumer Sentiment Survey declined again in May to 50.8, the second-lowest sentiment reading in the survey's history. The report's closely followed inflation projections showed consumers expected prices to rise by 7.3% over the next year. It's the highest inflation expectation since 1981. Economists expected a slight rebound in sentiment this month amid optimism about trade negotiations and the first agreements being reached. Consumer sentiment has plunged so far this year on worries that import taxes would raise prices. While the preliminary readings for May capture the period after Trump issued a 90-day pause on many tariffs on April 9, the survey only covers two days after the White House announced a tariffs agreement with China on May 12. 'Many survey measures showed some signs of improvement following the temporary reduction of China tariffs, but these initial upticks were too small to alter the overall picture—consumers continue to express somber views about the economy,' wrote Michigan Survey of Consumers Director Joanne Hsu. Sentiment surveys have shown that consumers are worrying about the direction of the economy in the face of higher U.S. tariffs. But so far, the 'soft data' fears expressed by consumers haven't shown up in the 'hard data' of retail sales and other economic measurements. 'If you took them at face value Americans would be crashing the economy by spending next to nothing, but retail sales rose last month, though slightly,' wrote Navy Federal Credit Union Corporate Economist Robert Frick. 'What this does tell us is consumers are so on edge that a contraction in the labor market or in incomes could easily shock consumer spending and push us into recession.' Read the original article on Investopedia Sign in to access your portfolio
