NY Fed: Consumers Expect More Inflation

By Staff Writer September 14, 2021

The Federal Reserve Bank of New York’s Center for Microeconomic Data released the August 2021 “Survey of Consumer Expectations, which shows that short- and medium-term inflation expectations rose to new series highs.

Home price growth expectations continued to moderate in August but remain elevated. Perceptions about households’ current financial situations improved and income growth expectations rose to a new series high.  

The main findings from the August 2021 survey are:

  • Median one-year-ahead inflation expectations increased by 0.3 percentage point to 5.2% in August, the 10th consecutive monthly increase and a new series high. Median inflation expectations at the three-year horizon also increased by 0.3 percentage point to a new series high of 4.0%. Both increases were broad based across age and income groups.
  • Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—increased at both the short- and medium-term horizons to new series highs. Both measures remain well above the levels observed before the COVID-19 pandemic.
  • Median year-ahead home price change expectations decreased slightly to 5.9% in August from 6.0% in July, marking the third consecutive monthly decline. The decrease was driven primarily by respondents under the age of 40 and was largest for those who live in the “South” and “Northeast” Census regions.

 

Labor Market

  • Median one-year-ahead expected earnings growth fell 0.4 percentage point in August to 2.5%, comparable to its February 2020 level. The decrease was driven mostly by respondents over the age of 40.
  • Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—increased by 3.3 percentage points in August to 35.0%.
  • The mean perceived probability of losing one’s job in the next 12 months increased slightly in August to 12.4% from 12.2% in July but remains near the series low. The mean probability of leaving one’s job voluntarily in the next 12 months also increased to 20.0% from 19.7%.
  • The mean perceived probability of finding a job (if one’s current job was lost) fell to 54.9% in August from 57.0% in July. The decrease was most pronounced among respondents aged 60 and over.

Household Finance

  • The median expected growth in household income increased by 0.1 percentage point to 3.0%, a new series high. The increase was most pronounced for the respondents with household incomes less than $50,000.
  • Median household spending growth expectations fell slightly to 5.0% in August from 5.1% in July but remain elevated relative to pre-COVID-19 levels.
  • Perceptions of credit access compared to a year ago slightly improved in August. Expectations for future credit availability deteriorated slightly, with fewer respondents expecting it will be easier to obtain credit in the year ahead compared to July.
  • The average perceived probability of missing a minimum debt payment over the next three months decreased by 0.7 percentage point to 9.6%, which is slightly below the 12-month trailing average of 10.1%. The decrease was broad based across age, income, and education groups.
  • The median expectation regarding a year-ahead change in taxes (at current income level) was unchanged at 4.6%. 
  • Median year-ahead expected growth in government debt decreased to 15.1% in August, from 15.7% in July.
  • The mean perceived probability that the average interest rate on saving accounts will be higher 12 months from now increased by 0.4 percentage point in August to 27.4%.
  • Perceptions about households’ current financial situations compared to a year ago improved in August, with more respondents reporting being financially better off than they were a year ago. Similarly, year-ahead expectations improved, with fewer households expecting a worse financial situation in the next 12 months.
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Last modified on Friday, 17 September 2021 14:22