US consumer sentiment slips; inflation expectations increase
WASHINGTON - U.S. consumer sentiment receded in April and households expected inflation to increase over the next 12 months and beyond, likely providing more ammunition for the Federal Reserve to delay cutting interest rates until September.
But inflation is not spiraling out of control, with producer prices increasing moderately last month. That was reinforced by other data on Friday showing import prices excluding fuels barely rose in March after surging at the start of the year. Since January, the sentiment index has remained within a narrow range 2.5 points, well under the 5 points which the University of Michigan said was necessary for a statistically significant difference. Economists polled by Reuters had forecast a preliminary reading of 79.0.
The survey's reading of one-year inflation expectations increased to 3.1% in April from 2.9% in March, rising just above the 2.3%-3.0% range seen in the two years before the COVID-19 pandemic. The survey's five-year inflation outlook rose to a five-month high of 3.0% from 2.8% in the prior month.A report from the Labor Department's Bureau of Labor Statistics showed import prices rose 0.4% in March after an unrevised 0.3% gain in February.
"Fed officials cannot lower their guard and rate cuts this year may not be as numerous as earlier forecasts had projected," said Christopher Rupkey, chief economist at FWDBONDS."But at least the slower increase in import prices is good news, adding to the producer prices report yesterday, that inflation pressures may not be raging completely out of control."
The cost of imported goods from China slipped 0.1% for the second consecutive month. They dropped 2.6% on a year-on-year basis in March. But prices of goods imported from Canada and Mexico increased solidly.
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