Inflation predictions largely partisan

Economists suggest might be better to track independents' opinions

By: Daniel de Vise
USA Today

..... When it comes to inflation, Democrats and Republicans seem to occupy separate realities.
..... Democrats expect prices to rise by 6.5% over the next year, [2025] according to a closely watched University of Michigan consumer survey in March. [2025]
..... Republicans expect prices to increase by 0.1%.
..... That spread illustrates how partisan politics shape not just approve ratings and consumer confidence but opinions about specific data points in the second term of President Donald Trump.
..... With the exception of Republicans, most rank-and-file Americans now predict resurgent inflation in the coming months. Overall American consumers expect 4.9% inflation over the next year, [2025] according to the University of Michigan Surveys of Consumers. That figure hasn't ranged so high since November 2022.
..... In December 2024, Americans expected prices to rise by only 2.8% over the next year. [2025]
.... In another consumer confidence suvey, from The conference Board, Americans said they expect prices to rise by 4.8% in the next year. [2025] That February [2025] figure is the highest reading since 2023.
..... On the other side of the sales counter, a survey of small business owners in February [2025] found 10-point increase in the share who said they were raising prices. That's the largest monthly jump since 2021, according to the National Federation of Independent Business.
..... "What we're seeing across all of these surveys is this belief that we're back in inflationary times," said Michael Negron, a fellow at the progressive Groundwork Collaborative.

Tariffs fueling inflation fears

..... Inflation fears are rising largely because of tariffs President Trump has launched a trade war with Canada, Mexico and China, among other targets. The president's stated goals include moving jobs back to the United States and reducing America's dependence on other countries.
..... Trump campaigned on a pledge to "end inflation," and he repeatedly assured supporters that other nations would pay the price for tariffs.
..... "It's not going to be a cost to you," he told supporters at a Wisconsin rally in September 2024. "It;s going to be a cost to another country."
.....Many Republican evidently still believe Trump will reduce the annual inflation rate to zero. In the first three months of 2025, republicans in the Michigan survey reported that they expect prices it rise by more than 0.1% over the next year. [2025] that is a median number, meaning that half of respondents gave a lower figure. It's reported as a three-month moving average.

Independents take middle ground

..... A year ago, when Joe Biden was president and Trump a candidate, the roles were reversed. in February 2024, Republicans expected prices to rise 3.7% in the year to come, [2025] while Democrats expected an increaser of 2.1%.
..... The actual inflation rate for February 2025 was 2.8%, neatly splitting the difference between the partisan forecasts.
..... "with Trump;s election, you suddenly had Democrats like, 'Oh wow, the future looks really bleak,' and Republicans are much more confident about the future," said Joanne Hsu, director of the Surveys of Consumers at the University of Michigan.
..... Hsu concedes, however, that the current spread between Democrats and Republicans on inflation, 6.5% vs. 0.1%, is stark.
..... "There's a huge amount of partisan influence when you see consumer sentiment," said Stephen Juneau, senior U.S. economies at Bank of America Securities. "We don't think inflation's going to all of a sudden fall to zero. We don't expect 6% inflation, either."
..... The unsung hero in this narrative might be the independents, who have served as a voice of moderation in recent Michigan surveys. In March, [2025] independents predicted prices would rise by 4.4% over the next year. [2025] The figure has been rising.
..... "That might be a good middle ground to track,' said Matthew Martin, a senior U.S. economist at Oxford Economics. "we're starting to see inflation expectations for that group trend higher."
..... Oxford Economics expects prices to rise by about 3.5% this year, [2025] Martin said. That forecast is for :core" inflation, which excludes food and energy prices because of their volatility.
..... A consumer survey by the Federal Reserve in February [2025] forecast that prices will rise by a more modest 3.1% over the next year. [2025] The Fed itself predicts its preferred inflation measure will reach 2.7% by year's end. [2025

Import fees on goods, not services

..... Economists are nearly unanimous in the view that tariffs raise prices for consumers in the country that enacts them.
..... While Republicans may have been slow to embrace that view, economists say, some Democrats seem to harbor exaggerated fears of tariff inflation.
..... If President Trump were to impose 10% tariffs on every product imported into the United States, prices would rise, but not necessarily by 10%.
..... Tariffs affect prices on goods, not services. The United States is a service economy.
..... "Two-thirds of our spending is on services," Juneau said. "Tariffs are really only going to affect goods, so they only affect that one-third."
..... Let's say you take your care in for new tires. Tariffs might raise the price of the tires, but they;d have no direct impact on the labor cost you pay to have them installed.
..... Economists draw a distinction, too, between the tariffs Trump has threatened and those he has enacted. Many of Trump's proposed import taxes have been scuttled, scaled back or postponed, often after rounds of tense negotiation.
..... Some of the proposed taxes might not come to pass.

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