In April, I wrote about inflation expectations versus reality. Today’s post is a short follow up to that one displaying a chart from TLR Analytic’s Philippa Dunne and Doug Henwood showing inflation expectations versus actual inflation outcomes. The expectations come from the Conference Board’s expectations survey. The gist of Ms. Dunne’s and Mr. Henwood’s observation is that humans aren’t good at forecasting.

Source: TLR Analytics

Going back to 1987, consumer expectations for future inflation were always higher than actual inflation outcomes except in late 1980s/early 1990s. This time could be different, but it’s unlikely humans have all of a sudden markedly improved at forecasting. I realize these measures don’t capture all the expenditures a common household encounters and don’t necessarily reflect all the inflation in “the system”. I also realize we could be at a long-term cyclical, or even a secular, turning point relative to the last 40 years. However, it doesn’t appear runaway inflation is in the cards right now and my guess is if the trend in inflation is turning up on more than a transitory basis it will occur gradually and with lots of volatility over the next several years, maybe even decade.

So all the people calling for inflation may be right, but they also may be very early.