Final May figures from the U.Michigan survey are available. Here is the table of several inflation rates expected in one year.
Figure 1: Actual year-over-year CPI inflation (bold black) and expected inflation from University of Michigan (red), New York Fed (light green), Survey of Professional Forecasters (blue +), the Coibion-Gorodnichenko SoFIE average (sky blue squares), and unit cost growth rate (chartreuse), all in %. Source: BLS, U.Michigan via FRED, Philadelphia Fed, Atlanta Fed, Cleveland Fedand the author’s calculations.
It should be noted that one series does not concern the CPI, namely the unit costs series from the Atlanta Fed’s Business Inflation Expectations Survey. The fact that this series does not exceed expected inflation suggests the absence of a strong price-cost spiral.
Interestingly, the SPF for May is one percentage point lower than the Michigan survey median. Although it is common for the SPF index to be lower than the Michigan (or New York Fed) measurements, the SPF index has moved closer to reality in recent quarters.
Interestingly, the Survey of Business Inflation Expectations (SoFIE) developed by Olivier Coibion and Yuriy Gorodnichenko remains higher than consumer/household measurements (these are averages versus medians reported earlier; see discussion here).
Conclusion: even though inflation expectations increased in May, they did not increase as much as expected (the final result in the United States in Michigan is 3.3% against a preliminary 3.5%) . The survey’s median of professional forecasters, at 2.5%, is roughly in line with the CPI inflation rate target implied by a 2% PCE deflator target.
