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Consumer sentiment data from the University of Michigan

  • Prior was 100.0
  • Current conditions 112.5 vs 110.0 prior
  • Expectations 88.6 vs 93.5 prior
  • 1-year inflation 2.6% vs 2.9% prior
  • 5-10 year inflation 2.2% vs 2.6% prior

Those inflation numbers are going to catch the Fed’s attention. The long-term number is the lowest on record.

The Fed does not want to see falling inflation expectations. Even though US economic data is strong, there is an increasing focus on putting a line under inflation in case the economy goes south. I think this is going to get some focus and take some of the life out of the US dollar.

Another notable part of the report is the skew between the two main sub-measures. Jeff Gundlach at Doubleline has been highlighting the divergence and how expectations are diverging from current conditions. The history of it as a predictor is impressive.

Doubleline slide

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