Cleveland Fed’s Survey of Firms’ Inflation Expectations: U.S. Business Leaders Show Increased Optimism About Inflation Trends

Business leaders across the United States are expressing a more optimistic outlook on inflation, with expectations for the coming year showing a notable decrease. In July, CEOs and top executives predicted that inflation would be around 3.4% over the next 12 months, down from the 3.8% they anticipated back in April, according to a press release from the Federal Reserve Bank of Cleveland on Monday, August 12.

The third-quarter expectations reported by business leaders match those of the first quarter and are at their lowest since the second quarter of 2021, when the expected inflation rate was 2.9%, according to SoFIE.

This development coincides with a report from the Federal Reserve Bank of New York’s Center for Microeconomic Data, which indicated that consumers also expect inflation to decrease over the next three years. The latest survey from July 2024 shows that consumers foresee inflation stabilizing at 3% over the next year, remaining steady at 2.8% over five years, and notably declining to 2.3% over three years—a series low since the Fed began these surveys more than a decade ago.

This data comes from the Cleveland Fed’s Survey of Firms’ Inflation Expectations (SoFIE), which collects insights from firms in the manufacturing and services sectors every quarter. The Cleveland Fed highlighted the importance of these expectations, noting that they can influence the pricing strategies of firms, which, in turn, can affect the broader inflation trend.

The broader economic impact of inflation has already influenced consumer behavior, as noted by PYMNTS Intelligence. Their February/March “New Reality Check: The Paycheck-to-Paycheck Report” revealed that inflation has led to spending cutbacks, with 60% of consumers reducing purchases of nonessential items, half opting for cheaper merchants, and a smaller portion switching to more affordable versions of the same products.

Overall, the data suggests that both business leaders and consumers are becoming more hopeful that inflation will continue to ease in the near future, reflecting a shift in economic sentiment that could have wide-reaching implications for pricing and spending trends across the country.

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