Consumer optimism emerges, yet inflation lurks

Consumer optimism emerges, yet inflation lurks

Consumer optimism has been held down by the pandemic over the past year, but attitudes have started to improve as COVID-19 disruptions begin to fade.  Consumer Sentiment from the University of Michigan jumped to the highest level in over a year in April –due in large part to improvements in the labor market– which should be supportive of the economic recovery in the months ahead. 

While the rebound in Consumer Sentiment is a positive development, the fact that consumers’ inflation expectations have climbed to an 8-year high is a major concern.  The University of Michigan expressed their concern over this trend by stating that “contingency plans are urgently needed to avoid declining inflation-adjusted incomes and surging interest costs.” In other words, the Federal Reserve and the federal government should be prepared to combat rising inflation as it is becoming a greater possibility.  We concur.