Consumers’ Short-Term Inflation Expectations Hit New High: New York Fed

 Commentary  October 19, 2021 at 07:44 AM  Share & Print

What You Need to Know

  • Median medium-term (three-year-ahead) inflation expectations rose from 4% to 4.2%.
  • But five-year inflation expectations have changed little since before the pandemic.
  • Both median expected growth in household income and in household spending remained unchanged in September at 3% and 5%.

Median inflation expectations for the short term, one year ahead, rose by 0.1 percentage points in September to 5.3%, the Federal Reserve Bank of New York’s Center for Microeconomic Data reported earlier this month. This was the 11th consecutive monthly increase and a new high for the New York Fed’s Survey of Consumer Expectations.

The SCE is a nationally representative, internet-based survey of a rotating panel of approximately 1,300 household heads who participate in the panel for up to 12 months, with a roughly equal number rotating in and out of the panel each month. 

Median medium-term (three-year-ahead) inflation expectations also increased, to 4.2% from 4%. At the same time, longer-term (five-year ahead) inflation expectations still appear to be as well anchored as they were before the pandemic, according to the report; they are little changed from July 2019, up to 3.16% from 3%.

The survey found that median year-ahead home price change expectations decreased by 0.4 percentage points in September to 5.5%, the fourth consecutive monthly decrease. Respondents who live in the West and Northeast Census regions drove the decrease for the most part.

Expectations about year-ahead price changes decreased for all the commodities considered in the survey:

  • Median short-term expectations for the price of gas decreased from 9.2% to 5.9%.
  • Cost of a college education, down 1.1 points to 5.9%.
  • Price of food, down 0.9 points to  7%.
  • Cost of medical care, down 0.3 points to 9.4%.
  • Rent fell 0.3 points to 9.7%.

Labor Market

According to the SCE, respondents’ median one-year-ahead expectations for earnings growth rebounded in September, increasing 0.4 points to 2.9%, well above its 12-month trailing average of 2.2%. The increase was driven primarily by respondents older than 40 and ones without a bachelor’s degree.

The mean probability that the U.S. unemployment rate will be higher one year from now increased by 0.8 points to 35.8%, slightly above its 12-month trailing average of 35.7%. 

The mean perceived probability of losing one’s job in the next 12 months decreased from 12.5% to 11.1%. This decrease showed up mainly among respondents younger than 40 and those with less than $50,000 in annual household income. 

European Compliance Association

European Compliance Association