University of Michigan 5-Year Inflation Expectations demonstrate how US consumers estimate the possibility of growth of prices for goods and services for the next 5 years. The index is calculated monthly based on data collected from a telephone survey of at least 500 US households. The questionnaire includes more than 50 questions on three broad areas of consumer sentiment: personal finance, business conditions and purchasing power.
Inflationary expectations are estimated based on whether respondents expect price growth or decline in the next 5 years and how they assess the percentage of such change. Also, consumers try to evaluate a possible change in their real incomes (and hence expenditures) for the same period.
Michigan University Inflation Expectations allows evaluating what dynamics consumers expect and how they may spend money in the future. The index normally correlates well with other indexes characterizing inflation (CPI, etc.). The questionnaire covers everyday life across the country, with the exception of Alaska and Hawaii. That is why the index is considered to be a representative leading indicator of inflation and consumer activity.
Lower readings indicate that consumers do not expect prices to rise. Conversely, the index growth suggests that households are ready for price increase. The Michigan Inflation Expectations index growth is generally seen as positive for the US dollar.
The chart of the entire available history of the "University of Michigan United States 5-Year Inflation Expectations" macroeconomic indicator. The dashed line shows the forecast values of the economic indicator for the specified dates.
A significant deviation of a real value from a forecast one may cause a short-term strengthening or weakening of a national currency in the Forex market. The threshold values of the indicators signaling the approach of the critical state of the national (local) economy occupy a special place.
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