Higher inflation takes its toll on US consumer confidence, University of Michigan says
Higher inflation is taking its toll on Americans' confidence in the economy, the results of a closely-followed survey revealed.
More to the point, the survey results appeared to suggest the potential for an "inflationary psychology" to set in.
A preliminary reading for the University of Michigan's consumer confidence index retreated from 88.3 at the end of April to 82.8 at the start of May.
Economists had penciled-in a print of 90.0.
According to the survey's director, Richard Curtin, the "tumble" in consumer confidence was triggered by the recent combination of data revealing the highest expected year-ahead and long-term inflation rates for the past decade.
"The average of net price mentions for buying conditions for homes, vehicles, and household durables were more negative than any time since the end of the last inflationary era in 1980," he said.
For now, Curtin continued, consumer behaviour did not point to an "inflationary psychology" at present, but the potential was there, Curtin argued.
"Shifting policy language and even minor rate increases could douse inflationary psychology. Indeed, such a policy would be consistent with consumer expectations since two-thirds expect a rate hike in the year ahead.
"It should be no surprise that consumers anticipate a booming economy over the next year or so, including rapid job gains as well as increases in the inflation rate and interest rates."