Do Households Expect Inflation When Commodities Surge?

FOOD prices; PRICE inflation; ECONOMIC recovery; UNITED States economy; HOUSEHOLDS; SUPPLY & demand; CONSTRUCTION materials

Household surveys indicate that consumers expect higher inflation this year than in recent years, as the U.S. economy rebounds from the deep recession. This has coincided with a surge in commodity prices, as strong demand for goods like gas, food, and construction materials is catching producers with low supplies. Evidence suggests that households respond to commodity price increases by raising their expectations of future inflation. However, since surges in commodity prices are transitory, their effects on inflation expectations--particularly long-term expectations--are modest and short-lived. [ABSTRACT FROM AUTHOR]

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