U.S. January Michigan CSI - Worrying jump in inflation expectations
January’s preliminary Michigan CSI of 73.2 is slightly down from December’s 74.0 and maintains December’s mix of rising current conditions and falling expectations. Most significantly, expectations for inflation have seen a significant bounce which will worry the FOMC.
Inflation expectations have risen to 3.3%, from 2.8% in December for the 1-year view and from 3.0% in December for the 5-10 year view, which is seen as important at the Fed. Tariff threats are likely a factor here.
The 5-10 year view has not been matched for a final monthly outcome since 2008, but was matched by the preliminary release for June 2023, a number that caused alarm at the Fed at the time.
The current conditions index if 77.9 is up from 75.1 in December and 63.9 in November, reaching its highest levels since April. The strength of December’s non-farm payroll is consistent with this.
The expectations index however of 70.2 is down from 73.3 in December and 76.9 in November and the lowest since July. Inflation appears to be the consumers’ greatest concern.
