One year horizon:
Figure 1: CPI inflation year-on-year (black), median expected from Survey of Professional Forecasters (blue +), median expected from Michigan Survey of Consumers (red), median from NY Fed Survey of Consumer Expectations (light green), forecast from Cleveland Fed (pink), mean from Coibion-Gorodnichenko firm expectations survey [light blue squares], all in %. November NBER defined peak-to-trough recession dates shaded gray. Source: BLS, University of Michigan via FRED and Investing.com, Philadelphia Fed Survey of Professional Forecasters, NY Fed, Cleveland Fed and Coibion and Gorodnichenko, and NBER.
Household and firm survey based forecasts remain higher than economist based forecasts, as well as economist and market indicator based (Cleveland Fed) expectations.
What is interesting is how household survey based expectations have diverged in recent months from gasoline prices. Over the 2019-2022 period, each ppt of y/y gas price inflation is associated with about 0.3 ppts of headline CPI inflation.
Figure 2: Year-on-year CPI inflation (black, left scale), Michigan year-on-year expected inflation, as of given date (red, left scale), and gasoline price inflation (green, right scale), all in%. NBER defined peak-to-trough recession dates shaded gray. Source: BLS via FRED, University of Michigan via FRED, EIA via FRED, NBER, and author’s calculations.
On this basis, I would have expected more of a decline in the Michigan number. Of course, a lot of other things go into expectations (as well as overall CPI inflation), so I leave this as an open question.
Market based (Treasury-TIPS spread) based expectations for five year horizon:
Figure 3: Five year inflation breakeven calculated as five year Treasury yield minus five year TIPS yield (blue), five year breakeven adjusted by inflation risk premium and liquidity premium per DKW (red), both in %. Source: FRB via FRED, Treasury, KWW following D’amico, Kim and Wei (DKW) accessed 12/3, and author’s calculations.