Consumer sentiment dropped 6.2% during the first two weeks of May on fears of inflation, both long-term and short-term.
Instead of a forecasted gain to 90.3%, sentiment dropped to 82.8, pushing real income expectations to the lowest levels in five years.
Both the Consumer Price Index and the Producer Price Index are rising at much faster rates than economists and other experts expected due to pent-up consumer demand, which will likely lead them to conclude that Federal Reserve on Wall Street are underestimating current inflationary pressures’ impact on the economy.
The survey’s chief economist Richard Curtin said that inflation was shaping up to be the worst since 1980, when the Fed hiked interest rates to try to slow it.
“This combination of persistent demand in the face of rising prices creates the potential for an inflationary psychology, fostering buy-in-advance rationales and cost-of-living increases in wages,” Curtin said.
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