New York Fed Consumer Survey Says Inflation Expectations Falling

The Federal Reserve Bank of New York released its latest Survey of Consumer Expectations today. Some good news for consumers: Medium one- and three-year-ahead inflation expectations declined sharply in July. They fell from 6.8 percent to 3.6 percent in June to 6.2 percent and 3.2 percent in July. Here is a link to the full survey.

One year inflation expectations (Federal Reserve Bank of New York Consumer Survey/August 8, 2022)

Three year inflation expectations (Federal Reserve Bank of New York Consumer Survey/August 8, 2022)

What Does the New ABC/Ipsos Poll Tell Us About the November Elections?

A newly released ABC/Ipsos poll caught our attention this weekend. While there has been a cascade of brutally bad polls for President Biden and Democrats in general, this poll may suggest there is a slight reconsideration among voters.

The poll clearly shows Republicans are more trusted to handle key issues like the economy, inflation, and crime. Moreover, the pattern shows that the same voters polled are enthusiastic about voting in the midterms this November - a continued negative for Democrats.

But the poll also showed that 1/3 of those polled - particularly independents - do not trust either party to do a particularly good job. Our read of this is Democrats have room to claw back what were thought to be lost voters, and Republicans still have a lot of work to do to win by the margins they and many in their base think they will be in November.

The poll shows - as so many other polls have shown - that President Joe Biden’s job approval rating holds steady across many issues, but he’s touching historic lows. The one bright spot for President Biden is his handling of coronavirus (56%). The negative? 29% percent approve of his handling of inflation, 37% approve of his handling of the overall economy, and 43% approve of his handling of the Russian invasion of Ukraine. Those figures will be incredibly hard to turn around between now and November. And if gas prices and food prices begin to spike again, they will only get worse.

The upshot is we now expect a particularly intense three-month sprint to November. There is little time for Congress to do much legislatively between now and then to alleviate inflation/broader economic concerns, and the so-called Inflation Reduction Act (passed by the Senate yesterday and expected to be passed by the House this Friday) will have virtually no impact on actual inflationary pressures. Moreover, voters broadly will not see or feel any significant benefits before the mid-terms. For Democrats, the legislative victory may be something of a tonic to energize Democratic voters who have been dismayed by the lack of success on many hoped-for agenda items - particularly among the Progressive wing of the Democratic Party.

Finally, we would argue polling going forward begins to take a sharper focus and, we believe, will be more telling and indicative than they have been did in recent months. Buckle up, everyone. As we said, it is going to be a very intense three months ahead.

You can access the ABC/Ipsos press release HERE and the toplines/details of the poll HERE.

IMF Downgrades Global Economy Forecasts: Going From Bad to Worse

The International Monetary Fund (IMF) released their new baseline forecast this morning, and it is quite a gloomy outlook. Noting the global economy is “reeling from the pandemic, and Russia’s invasion of Ukraine [the world] is facing an increasingly gloomy and uncertain outlook.” You can access the full report HERE

With this in mind, the IMF downgraded their growth forecast from 6.1 percent (which they made only in April) to 3.2 percent for the remainder of 2022 and down further to 2.9 percent in 2023.

Of note, they see China - facing further COVID lockdowns and a deepening and worrisome real estate crisis — seeing its growth pushed down to 3.3 percent this year. That is the slowest growth in China in four decades.

The Eurozone is facing particularly rough waters ahead, with growth now projected to slow to 2.6 percent for 2022 and 1.2 percent in 2023.

Added to this, the IMF assessment sees global inflation spiking to 6.6 percent for advanced economies and 9.5 percent in emerging and developing countries.

With rapidly growing food security issues in Africa and the Middle East caused by Moscow’s aggression, these assessments will likely change again. Our assessment is this, in turn, will bring new pressures on the EU and US to either accelerate military aid to Ukraine or begin to contemplate ways to find a negotiated solution - something we believe Moscow will not be particularly interested in pursuing unless they continue to suffer significant military losses. It is going to be a tough fall with many historic decisions facing leaders everywhere.