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Inflation Watch

Pump Prices Help to Drive Inflation Outlook

By April 27, 2014No Comments

Pump Prices Help To Drive Inflation Outlook


While we watch many indicators that might point to a future rise in inflation, the above chart depicts how consumers correlate near term inflation expectations with prices paid at the pump.

According to Friday’s consumer sentiment survey put out by Thomson-Reuters and the University of Michigan, consumers think inflation will be 3.2% a year from now, little changed from expectation readings so far this year. (Consumers almost always think inflation is running higher than the government’s official measures. The consumer price index, for instance, shows prices are up just 1.5% in the past year.)

Changes in gasoline prices tend to color how consumers view inflation. That’s not a surprise since gas prices are very visible and drivers tend to fill up frequently. Prices at the pump have been rising lately. Add in the price jump for some grocery items—most notably beef and pork—and it would not be surprising if inflation expectations edge up in coming months.

(Source: Wall Street Journal)