U.S. May Michigan CSI - Lowest since November, inflation expectations highest since November
May’s preliminary Michigan CSI of 67.4 from 77.2 is the weakest since November 2023 and hints at a loss of momentum in the economy, but with higher inflation expectations, the 1-year view up significantly to 3.5% from 3.2% and the 5-10 year view up marginally to 3.1% from 3.0%.
The 1-year inflation view is the highest since November 2023 and the improved tone in sentiment on the economy coincided with a significant fall in inflation expectations in December. Now inflation expectations are picking up again, sentiment on the economy is souring.
The Fed is more interested in the 5-10 year view on inflation which has kept to a tight range in recent years despite substantial volatility in the actual inflation pace. The rise in the 5-10 year view is marginal, but is also the highest since November 2023 so unwelcome.
The decline in sentiment saw fairly similar falls in both current conditions, to 68.8 from 79.0 and expectations, to 66.5 from 76.0. Both of these indices are also the lowest since November 2023.
