Consumers Are Worried About Higher Prices— And That Could Make Prices Increase | Global News Avenue

It’s not a happy start to the new year for consumers, who are even more uneasy about rising prices.

Latest inflation expectations rise sharply Michigan Consumer Confidence Indexwhile views on the economic outlook also worsened in the survey’s preliminary January report. Fed officials pay close attention Consumer perceptions of inflation Because it will put upward pressure on prices and wages.

Overall, the index fell slightly to 73.2. Economists surveyed wall street journal and Dow Jones Newswires Readings are expected to remain at December 74.0 level.

Inflation expectations soar

The survey shows consumers now believe inflation will reach 3.3% next year, up from 2.8% in December and the highest level since May. Consumers’ long-term expectations for inflation surged to their highest level since 2008.

“Inflation expectations have risen across multiple demographic groups in both the short and long term, with particularly strong increases among lower-income consumers and independents,” said Joanne Hsu, director of the University of Michigan Consumer Survey.

Tariff concerns could hamper inflation progress

Economists say the tariff proposals are the main driver of rising inflation expectations, with nearly a third of respondents to the Michigan survey citing tariffs.

President-elect Donald Trump made Tariffs are a key part of his economic agenda. He proposed raising import taxes China, Canada, Mexico, and other countries, a move some economists believe will raise prices.

Wells Fargo economists Tim Quinlan, Shannon Grein and Jeremiah Kohl point out that some consumers appear to be thinking this way. People may rush to buy goods before the tariffs are implemented to avoid paying higher prices, the trio wrote.

This is bad for inflation, especially if progress on stabilizing prices stalls. Inflation has fallen from a peak of 9.1% in 2022 2.7% in November But it is still above the Fed’s 2% target.

“The idea here is that buying ahead of time to avoid future price increases will actually create more demand, which in turn will fuel inflation,” the Wells Fargo report states. “This ‘buy before prices go up’ mentality is detrimental to lower prices Gradual progress on price.”