Inflation is at a 40-Year High, and Consumers Expect it to Get Worse
April 12, 2022
Prices that consumers pay for everyday items surged in March at the fastest pace in more than four decades, according to the Labor Department.
The consumer price index (CPI), which measures a wide-ranging basket of goods and services, jumped 8.5% from a year ago, surpassing the already elevated Dow Jones estimate of 8.4%.
Much of that was driven by higher prices for gasoline, which have increased surged since Russia’s invasion of Ukraine. However, even the “core” CPI, which excludes volatile categories like food and energy, increased 6.5% from the year before, the biggest annual core CPI increase since 1982.
There are signs that core inflation may be easing. On a monthly basis, core inflation was up just 0.3%, less than the 0.5% estimate, giving some economists optimism that core inflation may have peaked.
Consumers, on the other hand, expect inflation to continue surging. A recent survey from the New York Fed found that consumers see inflation hitting 6.6% over the next year. That’s a 10% increase in the median expectation over just the last month and the highest ever in data going back to 2013. The survey also found increased anxiety over job security and expectations that unemployment would increase over the next year. While these expectations may or may not come to fruition, they speak to souring consumer sentiment, which could lead to reduced consumption and drag on economic growth.