Spending

Consumer spending growth expectations soar, while inflation expectations edge up, New York Federal Reserve reports

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March 15, 2022 – NEW YORK – The Federal Reserve Bank of New York’s Center for Microeconomic Data has released the February 2022 report Survey on consumer expectations, which shows an increase in inflation expectations in the short to medium term, reversing some of the sharp declines of the past month. Expectations for the median house price, on the other hand, have declined. Earnings growth expectations for the year ahead remained unchanged, while expectations for unemployment, perceived job loss and job search expectations all improved. Expenditure growth forecasts for the coming year have reached a new record high. Expectations regarding future access to credit have deteriorated significantly.

The key findings from the February 2022 survey are:

Inflation

  • Median one-year inflation expectations rose from 5.8% in January to 6.0% in February, matching the high in the November 2021 series. The increase was broad-based across all groups of countries. age, education and income, but more important for respondents without a high school diploma. After a sharp decline in January, median three-year inflation expectations increased by 0.3 percentage points to 3.8%, while remaining below their November and December 2021 levels of 4.2% and 4 .0%, respectively. The survey’s measures of disagreement between respondents (the difference between the 75th and 25th percentiles of inflation expectations) remained unchanged at both horizons and well above their pre-pandemic readings.
  • Median inflation uncertainty—or expressed uncertainty about future inflation outcomes—decreased slightly at the one-year horizon and increased at the three-year horizon. Both metrics remain elevated from their pre-pandemic levels.
  • The median forecast for the change in house prices for the year ahead fell from 6.0% to 5.7%. The decline was more pronounced for respondents with no college education.
  • All expectations for commodity prices raised by the survey increased in February. Median expectations for food and gasoline price changes for the year ahead rose 3.3 and 1.5 percentage points to 9.2% and 8.8%, respectively. The predicted median year-ahead change in medical care and college education costs fell from 9.5% and 7.3%, respectively, to 9.6% and 9.0%. The expected one-year median change in rental prices fell from 9.8% to 10.1%.

labor market

  • Median expected year-over-year earnings growth was unchanged for the second consecutive month at 3.0% in February and remains above its 12-month average of 2.6%.
  • Average unemployment expectations — or the average likelihood that the U.S. jobless rate will be higher in a year’s time — fell from 35.9% to 34.4%. The decline was widespread across all age, education and income groups.
  • The average perceived probability of losing a job over the next 12 months fell 0.8 percentage points to 10.8%, hitting a new series low. The average probability of voluntarily leaving a job over the next 12 months also decreased, from 19.3% to 18.9%.
  • The average perceived probability of finding a job (if losing one’s current job) rose from 55.7% to 56.5%, remaining above its 12-month average of 54.0%. The increase is attributable to respondents without a high school diploma.

Household finances

  • Median expected household income growth fell 0.1 percentage point to 3.2% in February, but remains above its 12-month average of 3.0%.
  • Median expectations for household spending growth in the year ahead rose sharply to 6.4% from 5.5% in January, reaching a new high since the start of the series in June 2013. The increase was widespread across age, income and education groups.
  • Expectations about the future availability of credit deteriorated significantly, with more respondents expecting it to be more difficult and significantly fewer respondents expecting it to be easier to get credit over the course of the year to come. Perceptions of access to credit compared to a year ago have also deteriorated, with more (fewer) respondents finding it harder (easier) to get credit now that there are a year.
  • The average perceived likelihood of missing a minimum debt payment over the next three months fell 0.8 percentage points to 9.2%, a new series low.
  • The median expectation of a change in taxes for the coming year (at current income level) increased slightly from 4.4% to 4.5%.
  • The expected median growth in public debt for the year ahead remained unchanged at 11.1%.
  • The average perceived likelihood that the average interest rate on savings accounts will be higher 12 months from now rose to 31.3% from 30.5%, its highest level since May 2019.
  • Perceptions about the current financial situation of households compared to a year ago have deteriorated slightly, with more (fewer) respondents saying they are financially worse off (better) than a year ago. Respondents were mixed about their household financial situation in the coming year, with a higher proportion of respondents expecting their financial situation to deteriorate and also a higher proportion of respondents expecting their financial situation improves in a year.
  • The average perceived likelihood that US stock prices will be higher 12 months from now fell 1.5 percentage points to 37.0%. This is the series’ lowest reading since June 2013.

About the Consumer Expectations Survey

the Survey on consumer expectations (SCE) contains information on how consumers expect headline inflation and the prices of food, gas, housing and education to behave. It also provides insight into Americans’ views on job prospects and income growth and their expectations regarding future spending and access to credit. The ECS also provides measures of uncertainty regarding consumer prospects. Expectations are also available by age, geography, income, education, and numeracy.

The SCE is a nationally representative online survey of a rotating panel of approximately 1,300 household heads. Respondents participate in the panel for up to 12 months, with roughly equal numbers entering and leaving the panel each month. Unlike comparable surveys based on repeated cross-sections with a different set of respondents at each wave, this panel allows the survey to capture changes in expectations and behavior of the same individuals over time. For more information on the SCE, please see an overview of the survey methodology here, the interactive graphical guide and the survey questionnaire.
Source: Federal Reserve Bank of New York