Americans' views on inflation are finally turning a corner

Consumers' expectations for inflation dropped in May for the first time in 2025.
CPI data has been steadily improving, but sentiment readings have lagged the hard data.
Improved consumer sentiment could boost markets and help prevent a recession.
Americans are finally starting to feel less anxious about inflation.
Consumer price index data showed inflation cooled in May. That comes alongside a brightening of inflation expectations in the latest survey data.
This embedded content is not available in your region.
The New York Fed's survey of consumer expectations, published on Monday, showed that consumers' forward-looking inflation outlook declined in May for the first time this year.
The median one-year-ahead inflation expectation decreased, dropping from 3.6% in April to 3.2%. Three-year-ahead and five-year-ahead inflation expectations also declined, falling from 3.2% to 3.0% and from 2.7% to 2.6%, respectively.
The survey marks a turning point in the gap between "soft" and "hard" economic data, with the vibes in the economy starting to more closely align with the facts on the ground.
Inflation and labor market data have been looking more and more upbeat, but forward-looking gauges like inflation expectations and consumer sentiment have headed in the opposite direction.
Last Friday's jobs report also showed higher-than-anticipated job creation and unemployment levels hovering near historic lows. Yet, May's University of Michigan consumer sentiment reading plunged to from 52.2 to 50.8, the second-lowest reading ever recorded.
Wall Street has been more focused on the hard data.
May was a strong month for markets as slowing inflation and US-China trade relations led stocks to recover their Liberation Day losses. Recession expectations have come down from 60% to as low as 30% among some forecasters.
As stocks continue to gain after April's peak tariff volatility, strategists are also recalibrating their inflation expectations. While inflation could spike later this summer, as it could take three months or more for retailers to pass on tariff-related price increases to consumers, Goldman Sachs believes inflation will only see a temporary uptick from tariffs in 2025 before heading back down in 2026.
Now, it seems like consumers are finally getting on the same page. In addition to the improved inflation outlook reported by the New York Fed, the Consumer Confidence Index rebounded, increasing 12.3 points in May to 98.0 — its first increase after falling for five consecutive months.
Goldman Sachs said that for past event-driven recessions, soft data has usually bottomed around 60 days after a catalyst. As Liberation Day moves further into the rearview, Americans appear to be adjusting their economic outlooks.
Darrell Cronk, chief investment officer of Wells Fargo, echoed this perspective.
"What people forget is that sentiment is a reflection of what has happened already, not what will happen in the future," Cronk said during the bank's midyear outlook conference on Tuesday.
More optimistic sentiment could be a tailwind for markets, according to Goldman Sachs. Pessimistic consumers have pulled back on spending, especially in discretionary categories like airfare and travel.
With consumer spending making up roughly two-thirds of GDP, sentiment improvement could help prevent a recession and boost markets.
Read the original article on Business Insider

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

Yahoo

20 minutes ago

• Yahoo

10 Reasons Every American Adult Should Invest in the Stock Market

Investing can be scary, and there are many horror stories out there. But investing can also be simple and boring. If done right, history shows that losing money in the stock market is unlikely on a long-term basis. These 10 stocks could mint the next wave of millionaires › Investing can be daunting for many reasons. Stocks, index funds, and exchange-traded funds (ETFs) go down all the time, and the market has been extremely volatile, especially since the beginning of the pandemic in 2020. Furthermore, most people are investing money they will need in the future, and nobody can predict the future. That said, 62% of Americans reported owning a stock in 2025, according to a Gallup poll. Here are 10 reasons every American adult should invest in the stock market. The main reason most retail investors buy stocks, index funds, or ETFs is because they want to start saving for retirement. I don't need to tell anyone that life is expensive when you consider the cost of paying a mortgage or rent, food, transportation, and clothing, among many other expenses. These expenses can eat up a large portion of your paycheck, which is why people need to think about ways to grow their wealth over time. Investing allows people to do this while they work and sleep. Most investors have likely read stories about people investing in meme stocks like GameStop back in 2020 or some small cryptocurrency that no one has ever heard of. Rarely, someone does strike it big, but often, people end up losing their money on these high-risk trades. That roller coaster ride certainly isn't for everyone, and rightfully so, because many people need every last dollar they can save and can't afford to make overly risky bets. Luckily, investing can be quite boring if you invest in an index fund or ETF that buys a basket of diverse stocks set up to generate steady returns for patient investors that stay invested for years if not decades. Many investors with a long-term horizon invest in the broader benchmark S&P 500 index. According to data from Berkshire Hathaway, the S&P 500 has generated compound annual gains of 10.4%, including dividends, between 1965 and 2024, for an overall gain of 39,054%. That means $1 invested in 1965 would be worth $390.54 now. While the S&P 500 can be volatile on a short-term basis, the longer one stays invested, the more likely they are to make money. This is generally because long-term investors aren't trying to time the market, so they ride out generally short-term downturns and profit from recoveries. Now, investors may be concerned that the S&P 500 is too heavily concentrated by a group of stocks called the "Magnificent Seven,"+ meaning diversification in the broader benchmark index is less than it used to be. This is true. A group of large companies specializing in tech and artificial intelligence have taken the market by storm. Stocks like Nvidia and Apple now have market caps well over $1 trillion, a feat that used to be unthinkable. For investors who want to avoid this concentration, there are ways to buy an equal-weighted S&P 500 fund that removes the weighting of each stock. Investing requires patience, but if you trust the process, you'll realize that you can accumulate more wealth than you may have ever thought possible. This is due to the power of compounding. For instance, let's say you're just starting your career and don't have a lot of spare cash to invest but manage to scrape together $500. If you invested that money in the S&P 500, assume long-term historical returns of 10.4%, and add just $100 to your portfolio a year for 30 years, that initial $500 will grow into over $27,000. All you have to do is wait patiently. Also, as your career advances, you will likely have more disposable cash to invest, which will significantly enhance your returns. Now, a lot of risk-averse people may simply care too much about their money to trust the market, and I can certainly understand this sentiment. Unfortunately, keeping money in a checking account that doesn't earn anything will actually lose you money. This is because of inflation, in which consumer prices generally rise over time. Just think about how much prices have risen from before the pandemic in 2020 to now. If you kept your money in a checking account, its value stayed the same, but the price of pretty much everything else rose, leading to a loss of purchasing power. Many people are investing through an individual retirement account (IRA) or a 401(k) through an employer. In these cases, the U.S. tax code actually allows people to deduct a certain amount of contributions from the income they earn that will be taxed, leading to a lower tax bill. The limits in 2025 for an IRA are $7,000 per year for those under 50 and up to $23,500 for a 401(k). It can definitely make a difference. There's more than one way to invest. Some people buy large, very safe blue chip stocks; some buy stocks for their dividends; and some are more aggressive and make risky bets, hoping that one big win will make up for all the other losses, similar to a venture capitalist. The point is that you can invest in different strategies, sectors, regions, etc. Speaking to a financial advisor can be helpful because they can assess your current financial situation and your risk tolerance to develop a good investment strategy for you. When most people have money, they want to spend it. This tempts all of us to make purchases that we may want but don't necessarily need. By putting a certain amount of money each year into a retirement account or portfolio, people are removing some of these temptations and reinforcing smart spending habits. As I mentioned earlier, each dollar invested can go a long way due to the power of compounding, so each dollar we don't invest subtracts from your future wealth. It would be wonderful if everyone had financial freedom all the time, but that just isn't realistic. However, most people need more money as they get older because they have more responsibilities, whether it's starting a family, buying a house, or dealing with higher medical bills. If you invest younger when you typically have less responsibility, you'll be happy you have an investment portfolio that you can use later on if needed or that you aren't stressing about retirement. More than a few disciplined and patient investors have achieved financial freedom much earlier than they likely ever thought possible by starting early. Ever feel like you missed the boat in buying the most successful stocks? Then you'll want to hear this. On rare occasions, our expert team of analysts issues a 'Double Down' stock recommendation for companies that they think are about to pop. If you're worried you've already missed your chance to invest, now is the best time to buy before it's too late. And the numbers speak for themselves: Nvidia: if you invested $1,000 when we doubled down in 2009, you'd have $373,066!* Apple: if you invested $1,000 when we doubled down in 2008, you'd have $38,158!* Netflix: if you invested $1,000 when we doubled down in 2004, you'd have $664,089!* Right now, we're issuing 'Double Down' alerts for three incredible companies, available when you join , and there may not be another chance like this anytime soon.*Stock Advisor returns as of June 9, 2025 Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, and Nvidia. The Motley Fool has a disclosure policy. 10 Reasons Every American Adult Should Invest in the Stock Market was originally published by The Motley Fool Sign in to access your portfolio

Forbes

22 minutes ago

• Forbes

Hidden Costs Of Robotaxis Could Slow Scaling — If The Tech Ever Works

The Baidu Robotaxi, launching test runs in the Jiading area of Shanghai, China, on July 15, 2024. ... More (Photo by Ying Tang/NurPhoto via Getty Images) The tech for robotaxis might be there one day (though, perhaps not yet for Tesla and its safety drivers). Regulators are busy at work. But can autonomous vehicles' business models really afford scale? Leaders from driverless companies at the MOVE 2025 conference in London this week repeatedly mentioned the issue of scaling — be it bringing down costs of autonomous tech, managing maintenance of robotaxis, and remote monitoring ratios. Pierre Pomper, chief commercial officer of autonomous trucking company Einride, said at the conference that "the stars are aligning" for autonomous vehicles, particularly with regulatory activity and technological maturity. "We're in the right place to scale." But even if that's true — and that remains to be seen — scaling these business models comes with plenty of challenges. True costs of robotaxi services versus people Industry leaders speaking at the conference laid out a series of hidden costs that need to be considered if and when the technology works and regulators allow such services. Helen Pan, general manager for Apollo Autonomous at Chinese tech giant Baidu, noted that the costs of vehicles and the hardware bolted onto them remains a major concern, noting they need to be significantly cheaper than a human driver or there's little chance for business success. "We have to go really low cost, extremely low cost," Pan told attendees. 'You have to be cheaper than a human driver, what the driver can deliver.' And while the cost of the car, sensor systems, and on-board computers are coming down, she said, they are just part of the total bill when it comes to robotaxi services, with many people working behind the scenes to enable such services despite removing a driver from behind the wheel. After all, an Uber or Lyft driver not only owns their vehicle (in most markets, at least) but also cleans and maintains it, with all the time and costs that includes. For a robotaxi service, the driver is gone — so someone else needs to be hired to clean out cars. Rosa Mendoza, who drives for Uber and Lyft, cleans her car with disinfectant before the car caravan ... More protesting Uber's "refusal to obey basic labor protections for drivers in 2020 in San Francisco, Calif. The bottle of disinfectant she was using was provided by Uber but Mendoza, in the car, keeps masks, towels, gloves and other disinfectants in her car that she acquired herself. (Photo By Lea Suzuki/The San Francisco Chronicle via Getty Images) Lukas Neckermann, co-founder of PAVE Europe, pointed out that early deployments of robotaxis in China and the US had as many people "behind the scenes" as they would have had drivers. "All of that effort that goes into what an Uber or Lyft driver does — cleaning the vehicle, maintaining the vehicle, charging the vehicle, registering the vehicle, the fleet management, et cetera — it doesn't go away, it just goes somewhere else," Neckermann noted. 'Some of that back office operation is a real opportunity, on the one hand, but it's also a real cost.' Remote robotaxi operations One "back office" cost to driverless is remote operation — and the ratio between cars and human monitors back at headquarters isn't information that companies are keen to share, with Tesla saying ahead of its robotaxi launch that it would have "plenty of tele-ops". At MOVE 2025, Kathy Winters, COO at May Mobility, stressed that "teleassist" wasn't about remotely driving the vehicles. "They simply monitor and, if a vehicle gets into trouble, make suggestions or give it permission to maybe go around something that popped up strangely," she said. "It's very rare." A May Mobility autonomous vehicle shuttle in Ann Arbor, Michigan, US, in 2023. Photographer: ... More Matthew Hatcher/Bloomberg She said May started with a one-to-one ratio of car to human monitor in the beginning, and has since improved that to one person overseeing four vehicles. "By the end of this year, very soon, we'll be one monitor person to ten vehicles," she predicted. "So when you start to see those kinds of numbers go up, it gets very cost efficient and very effective." But that suggests that companies that haven't managed to improve that ratio could struggle to scale. Scaling training data for robotaxi rollouts Winters also pointed to the ongoing challenge of expanding into new cities — an idea known as generalisable autonomy, allowing a car that works in, say, San Francisco, to be dropped into Miami, London or Tokyo with as little additional training as possible. It's something Waymo is testing this year with trials in a wider range of geographical locations, to see if the existing system can work in other locales. "Most companies, they invest a lot," May's Winters said of such efforts. She said that first an autonomous company raises billions of dollars, then it drives millions and millions of miles for training, hard-codes in edge cases, and develops an offline driving model — only to have to do it again when they move to another city. That's a major hurdle for scaling. "Many of the autonomous vehicle companies that have taken this approach, they haven't succeeded," she added, pointing to Cruise among others. "The model wasn't sustainable." Because of that, Winters suggested that any systems trained in places with only nice weather would find difficulty elsewhere — May Mobility, she was keen to point out, has operations in Ann Arbour, Michigan, which has the full "four seasons, most of them bad". And, she said that highlighted the importance of building reasoning into systems, so they could better "understand" what they see, even if they've never seen it before. Others noted the challenge of shifting to driving on the right-hand side of the road, with May and Waymo both currently testing in Japan, and Baidu doing the same in Hong Kong, in order to train systems. Different business models for robotaxis Gavin Jackson, CEO at Oxa said, suggested that the high costs and lack of actual need could compound to slow the robotaxi rollout — with autonomy instead coming to trucks first. "What problems are we trying to solve," Jackson said, later adding: 'we think that the problem that needs solving the soonest is adding more capacity to logistics.' The Einride T-pod autonomous concept truck is pictured during the press preview at the 2018 North ... More American International Auto Show (NAIAS) in Detroit, Michigan, on January 16, 2018. (Photo credit should read NOVA SAFO/AFP via Getty Images) Winters pointed to public transport potential, but noted that robotaxi services were a solid way to get more autonomous cars out there, referencing May's recent shift into that arena with Uber. "This move to take on ride hail is just a different way to scale," she noted. 'You know, we see the need for accessible transportation for folks everywhere, whether it's public transit or not, and we want to reduce the amount of dependency on car ownership.' And she noted the costs of personal car ownership shouldn't be ignored. 'It's really expensive.' So even if the tech gets sorted, the road to driverless taxis and robotaxi services remains full of costs.

Bloomberg

26 minutes ago

• Bloomberg

Bloomberg Daybreak: World Awaits Iran's Response

On today's podcast: 1) Iran vowed retaliation and kept up attacks on Israel following the US strikes on its nuclear facilities over the weekend, fueling fears of a wider war in the Middle East and rattling global markets. 2) President Donald Trump's decision to order US forces to attack three key Iranian nuclear installations may have sabotaged the Islamic Republic's known atomic capabilities, but it's also created a monumental new challenge to work out what's left and where. 3) Oil erased earlier gains as fears began to fade of an immediate disruption to supplies from the Middle East, following US strikes on key Iranian nuclear sites.