According to data released by the Bureau of Economic Analysis on June 25, inflation accelerated last month to its fastest pace in three years. The personal consumption expenditures index rose 0.4% month-over-month in May and 4.1% year-over-year. The increase in fuel and other product prices was more than double the Federal Reserve's 2% inflation target.

Since mid-June, when the U.S. and Iran reached a framework agreement to end the war, fuel prices have edged down. As of June 26, the average price of regular gasoline had fallen from $4.49 to $3.90 over the past month, a drop of about 15%, according to AAA data.

"Americans now hope that the worst of the inflation crisis is behind them," Navy Federal Credit Union chief economist Heather Long said in a report, adding that "they may be right."

"With the most severe impact of the Iran war energy shock on consumers arriving, inflation may have peaked in May," she said.

"The key question is how quickly inflation cools," Long said, noting that price pressures for electricity, healthcare and some grocery items remain elevated.

"Consumer confidence will rise further this summer, but it will take a long time to return to near 'normal' levels," Long said.

Hsu said that expectations for business conditions over the next five years surged 16%, according to the University of Michigan's measure. In addition, in June households' assessments of their personal finances rose 9% and one-year expectations rose 15%.

However, Hsu noted that both figures are far below levels at the start of the year; and for the third consecutive month, more than half of consumers spontaneously said high prices are eroding their personal finances. Hsu said the confidence index remains in "unfavorable territory," 13% below the pre-war level in February and 20% below a year ago.

SellerHome Commentary

Consumer confidence recovery and cooling inflation expectations may ease demand pressure on some categories, but short-term gasoline price fluctuations remain a variable. Cross-border sellers should pay attention to subsequent shifts in consumer spending structure, remain vigilant about the lingering suppression of non-essential goods by high inflation inertia, and flexibly adjust inventory and pricing strategies.

Source: Retail Dive
Original link: https://www.retaildive.com/news/consumer-sentiment-record-low-prospect-lower-inflation-fed/823953/