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April 16, 2021 12:00 PM, EDT

Consumer Sentiment Rises Along With Inflation Expectations

Shoppers carry bags on Market Street in San Francisco Shoppers carry bags on Market Street in San Francisco. (David Paul Morris/Bloomberg News)

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U.S. consumer sentiment improved in April following another round of fiscal stimulus and as job growth accelerated. At the same time, inflation expectations surged to the highest in nine years.

The University of Michigan’s preliminary sentiment index rose to 86.5 from 84.9 in March, data released April 16 showed. While the figure was softer than the 89 forecast in Bloomberg’s survey of economists, it remains at a pandemic high.

Consumers are more upbeat as the economic recovery strengthens. A surge in pent-up consumer demand is expected to propel the U.S. back to its prepandemic strength. At the same time, policymakers are watching closely to see how quickly prices increase as the economy takes off.

consumer sentiment graphic

Consumers expect inflation to rise 3.7% over the next year, the highest since March 2012. They expect prices over the next five years to increase 2.7%, compared to 2.8% last month.

The gauge of current conditions rose to 97.2, while a measure of expectations held at 79.7, according to the survey conducted March 24 to April 14.

“Many fewer consumers mentioned the appeal of low prices and many more justified buying based on improved job and income prospects,” Richard Curtin, director of the survey, said in the report.

Respondents were more upbeat about their current financial situation and buying conditions remained solid.

— With assistance from Chris Middleton

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