University of Michigan United States Inflation Expectations

University of Michigan Inflation Expectations demonstrate how US consumers estimate the possibility of growth in prices for goods and services for the next 12 months. 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 evaluated based on how respondents answer the following questions:

• Do you think prices in general may rise, fall or remain unchanged in the next 12 months?
• What percentage of growth/fall do you expect in the next 12 months?

Also consumers forecast their real income 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.