U.S. consumers expect much higher prices over the next year and they expect elevated inflationary pressure to persist for years, data released Friday showed.
The University of Michigan’s survey of consumers in May indicated that consumers expect a 4.6 percent rise in prices over the next 12-months, the highest level of inflation expectations since April 2011.
The expectation for 5-year inflation hit 3 percent, also the highest level in several years.
“Record proportions of consumers reported higher prices across a wide range of discretionary purchases, including homes, vehicles, and household durables – the average change in May vastly exceeds all prior monthly changes,” said Richard Curtin, the survey’s chief economist.
Despite rising prices, consumers are unlikely to pull back on spending because their savings have been boosted by multiple rounds of stimulus payments and very large government deficits. Deficit spending tends to boost saving because the federal government