From egg prices to housing prices, U.S. inflation expectations are rising again

On the road to economic recovery in the United States, the clouds of inflation are gathering again.

Recent data shows that price increases are intensifying across multiple sectors, whether it be housing or egg prices. A new round of supply and demand pressures, along with a tight labor market and the tariff policies of the Trump administration, have further heightened concerns about future price increases.

From input costs, wage growth to inflation expectations, a series of reports indicate that price pressures are re-emerging. The Federal Reserve's preferred core inflation indicator—the Personal Consumption Expenditures Price Index (PCE)—will be released this Friday, and the market generally expects that the data for January will show an increase.

Lauren Saidel-Baker, an economist at ITR Economics, stated:

“We are very confident that inflation will return. We originally expected it to happen in the second half of this year, but it now seems that pressures are already building. Considering the current administration's tariff and immigration policies, there will be more factors affecting inflation in the future.”

Influenced by multiple factors, U.S. inflation is heating up again

Since 2020, the costs of raw materials such as lumber and steel have remained high and are continuing to rise. According to S&P Global, the input price index for U.S. manufacturers reached its highest level since October 2022 this month. The Institute for Supply Management (ISM) index also rose to its highest point since May of last year last month. Many businesses report that high input costs not only exacerbate budget pressures but will ultimately be passed on to consumers.

Notably, the rise in food prices has drawn widespread attention, especially as egg prices hit a record high. This is primarily due to the most severe avian influenza outbreak in U.S. history, which has significantly reduced supply. Meanwhile, prices for other essentials such as housing, healthcare, and auto insurance continue to climb, hindering overall inflation control.

Consumer expectations for future price increases are also rising. According to a survey by the University of Michigan, long-term inflation expectations for five to ten years reached their highest level since 1995 in February. Related data indicates that anxiety among consumers and businesses regarding price increases is growing, posing greater challenges for policymakers.

In addition to rising material costs, changes in the labor market are also keeping inflation elevated. According to ADP Research, employees who remained in their jobs saw their wages rise for the first time in January, marking the first rebound since the pandemic. At the same time, the government's monthly employment report shows that the growth rate of average hourly wages is on par with the increases seen in early 2022.

Faced with the re-emerging inflation pressures, the Federal Reserve's policy choices are particularly critical. Although the Fed is currently keeping interest rates unchanged, the ongoing rise in inflation pressures may force it to adjust its policies in the future