Inflation expectations among consumers in the U.S. have plunged, falling at the fastest rate ever in the history of the New York Federal Reserve’s monthly Survey of Consumer Expectations. The survey found that consumers expect inflation to rise 6.2% over the next year and 3.2% over the next three years.

Consumer Inflation Expectations Plummet

According to CNBC, the declines in inflation expectations come amid tumbling gas prices and a rising belief that the rapid increases in housing and food prices would also ease. The 6.2% inflation expectation for the next year and the 3.2% reading over the next three years are still quite high based on previous surveys.

However, they mark a sizable decline from the 6.8% and 3.6% readings recorded in the New York Fed’s June survey. The Bureau of Labor Statistics found that food prices increased 10.4% year over year in June.

Although food prices are still expected to increase 6.7% over the next 12 months, that still is a drop from the June reading of 2.5 percentage points, the largest decline in the series of data since June 2013. CNN noted that the falling consumer inflation expectations could become a self-fulfilling prophesy, as consumers who expect the price increases to ease might rein in their spending.

Digging Into The Survey Results

Additionally, survey respondents expect gas prices to rise only 1.5% over the next year, although they’re already up 60% over this past year. The 1.5% reading marks a drop of 4.2 percentage points from June to July and is the second-largest monthly drop ever recorded in the survey.

According to AAA, the price of a gallon of regular gas has declined by about 67 cents over the last month, although it is still 87 cents higher than where the prices at the pump stood last year at this time. Commodity prices have also been declining dramatically.

Meanwhile, consumers expect home prices to increase 3.5% from June’s reading of 4.4%, marking the smallest expected gain since November 2020. Inflation expectations for the next five years also declined, falling a half of a percentage point to 2.3%.

Preparing For The July CPI Numbers

The next consumer price index reading will be released on Wednesday, showing how inflation has actually moved. The key inflation gauge rose 1% in May and 1.3% in June, raising the year-over-year inflation rate to 9%, the fastest pace since November 1981.

JPMorgan Funds strategist David Kelly told CNN that the CPI could show that monthly inflation fell as low as 0.2% in July and potentially turn negative this month.

This article originally appeared on ValueWalk

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