Later Monday morning, we’ll get the New York Fed’s report on consumer inflation expectations, then producer prices on Tuesday, followed by the consumer price index on Wednesday. 

CPI dipped just below 3% a year in June — 2.97%, to be precise — and more of the same is predicted for July. Meanwhile, consumers’ expectations of where inflation is headed have also been cooling off — down to 3% at the one-year horizon and 2.8% over the next five years. 

Inflation expectations signal how quickly consumers think the Fed might win its battle against inflation. 

But when it comes to consumers spending their money, inflation expectations “don’t matter at all,” said Robert Frick at Navy Federal Credit Union. “If you’re trying to chart consumer spending based on inflation expectations, you might as well be looking at astrology.”

It turns out, when inflation’s high, consumers don’t rush out to make purchases to avoid paying higher prices later. Instead, Frick said that consumers spend primarily based on income, which is rising faster than prices right now.  

But consumers also spend based on how they feel about their personal finances — which is pretty mediocre, according to Deni Koenhemsi at Morning Consult.

“Savings have dwindled, and price levels are still taking its toll on the consumer,” she said.

That’s because prices are so much higher than a few years ago and are likely to stay that way.  

Stories You Might Like

Consumers expect inflation to tick down in the next 3 years

Consumers are getting used to higher inflation

Inflation can start from perceptions — that’s why the Fed surveys consumers

Consumers aren’t worried about spiking prices — yet

The Fed has ways to put the brakes on rising prices

Inflation rates have been a little stuck lately. Is that a bad thing?