If what Americans search for using Google is any indication, inflationary pressures peaked in May. That's when interest in the term topped out, according to Google Trends.
This doesn’t mean higher prices are no longer a worry, but it may be a sign that could help cool concerns about predictions for fast-rising prices.
Investors will get the latest read on wholesale and consumer prices in the week ahead. The data likely will continue to show higher prices, although the rate of increases from a year ago could be tempered.
Yes, Americans — and, really, all consumers in wealthy nations — are experiencing inflation like they haven’t for more than a decade. And it isn’t solely at the gas pump and grocery store. Airfares, rents and car prices have all shot up. The prices of bacon, eggs, couches and shoes were each up more than 10 percent in September compared to a year earlier.
The sharp snap-back in consumer demand coupled with supply chain choke points from overseas factories to U.S. cargo ports have helped push up prices. Then add stimulus checks, record low borrowing costs and rising wages and you have the classic inflationary dynamic: too many dollars chasing too few goods.
However, an important force involved in setting a course for inflation in the economy is the expectation of higher prices. Inflation expectations help set consumer and business behavior. Those expectations can be wrong, and often are, but they can influence financial decisions. Does a worker ask for a 5% raise instead of a 3% raise? Does a shopper buy a new kitchen table now or wait and risk not getting the table they want? Does a company raise prices, confident that competitors won’t undercut them?
When people are experiencing higher than usual price increases, they can’t help but think about it. After all, this is sticker shock. A September survey by the Federal Reserve Bank of New York found consumers expect inflation to jump 5.3 percent over the next year. Those expectations can turn quickly.
Perhaps not as fast as changing what you are searching on the Internet, though.
