The final May numbers from the U.Michigan survey are out. Here is a picture of expected inflation rates one year ahead.
Figure 1: Year by year actual CPI inflation (bold black), and expected inflation from University of Michigan (red), NY Fed (green), Survey of Professional Forecasts (green +), Coibion-Gorodnichenko SoFIE mean (blue squares) , and unit cost growth rate (chartreuse), all in %. Source: BLS, U.Michigan via FRED, Philadelphia Fed, Atlanta Fed, Cleveland Fed, and author’s statistics.
Note that one series does not correspond to the CPI, which is the unit cost series from the Atlanta Fed’s survey of Inflation Expectations. The fact that this series does not exceed expected inflation suggests the absence of price stability.
Interestingly, May’s SPF is a full percentage point below the Michigan survey average. While it is common for the SPF to read below the Michigan measures (or the NY Fed), the SPF has been moving closer to the original in recent quarters.
Interestingly, the Survey of Firm Energy Inflation Expectations (SoFIE) developed by Olivier Coibion and Yuriy Gorodnichenko is consistently higher than consumer/household measures (these measures are comparable to previously reported counterparts; see discussion here).
Bottom line: while inflation expectations rose in May, they did not rise as much as previously thought (U.Michigan final is 3.3% vs. preliminary 3.5%). The Survey of Professional Forecasters median at 2.5% is just around the CPI inflation target implied by the 2% PCE deflator target.
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