While one-year ahead measures in the SCE and the Michigan survey have seen large increases, these short-term measures tend to move with consumers’ experience of contemporaneous inflation. So what do these developments imply for the path ahead? One clear lesson is that we need to be humble about our ability to correctly anticipate future economic conditions given the unpredictability of the virus.
We had expected a smooth rotation from goods spending to services spending during a complete reopening this fall, but Delta has slowed this process. Partly as a result, employment gains flatlined in August in the leisure and hospitality sector, where many of the job losses have occurred.