Consumer Perceptions & Savings

These charts juxtapose two key indicators of consumer perceptions and behavior in relation to the inflation landscape: inflation expectation and personal saving rate, against actual inflation metrics.

Chart 1: Inflation Expectation and CPI

  1. Consumer Price Index (CPI) for All Urban Consumers (All Items): This measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

  2. University of Michigan: Inflation Expectation: This measure captures consumers' expectations about future inflation rates. It's based on a survey that asks consumers for their views on where they think inflation will be in the future.

Chart 2: Saving Rate and Median CPI

  1. Personal Saving Rate: This represents what portion of their income individuals are putting aside as savings. Higher rates indicate more cautious consumers, possibly preparing for uncertain economic times.

  2. Median Consumer Price Index: This provides a measure of core inflation by computing the median price change across all items in the CPI basket. It provides a different perspective on inflation that may be less affected by temporary price shocks.

By comparing these elements, we can gauge how consumer perception of inflation aligns with actual inflation indicators and how this might influence savings behavior.

Potential Interpretations:

Positive Scenario: If the inflation expectation aligns with the actual CPI, and the personal saving rate is stable, it suggests that consumers' understanding of inflation is accurate and that they are confident in the economy.

Negative Scenario: If inflation expectations are significantly higher than the actual CPI, and the personal saving rate is increasing, it could indicate that consumers are concerned about future inflation and are thus saving more, which could slow down economic growth.

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