Consumers’ Expectations Largely Stable; Home Price Growth Expectations Continue to Retreat

September 10 — The Federal Reserve Bank of New York’s Center for Microeconomic Data released the August 2018 Survey of Consumer Expectations, which shows a slight increase in the medium-term inflation expectations. Expectations about income and spending growth remained stable, while expectations about household financial situations improved. Home price growth expectations retreated for the second month in a row, while expectations about the growth in government debt rose to a level not seen since 2015.

The main findings from the August 2018 Survey are:


  • Median inflation expectations at the one-year horizon remained unchanged at 3.0%, while they increased by 0.1 percentage points at the three-year horizon to 3.0% in August, returning to its June reading. Inflation uncertainty remained unchanged.
  • Median home price change expectations declined to 3.6% in August from 3.7% in July and 3.9% in June, still remaining above its trailing 12-month average of 3.4%.
  • The median one-year ahead expected gasoline price change saw its third consecutive drop since May 2018, declining from 4.6% in July to 4.4% in August. Expectations for changes in food prices and in the cost of medical care, on the other hand, increased by 0.1 percentage points from 4.5% and 8.5% in July, to 4.6% and 8.6% in August.

Labor Market

  • Median one-year ahead earnings growth expectations increased from 2.4% in July to 2.5% in August, tying its 12-month trailing average. The increase was most pronounced among lower educated (high school degree or less) respondents.
  • Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—jumped from 34.2% in July to 35.3% in August, reaching its highest level since October 2017.
  • Both the mean perceived probability of losing one’s job in the next 12 months and the mean probability of leaving one’s job voluntarily in the next 12 months declined, from 14.0% to 13.8% and from 23.2% to 20.6%, respectively.
  • The mean perceived probability of finding a job (if one’s current job was lost) declined to 57.8% in August, falling below its 12-month trailing average of 59.0%, but remaining within its tight 57.1 to 60.1 range observed since July of 2017. 

Household Finance

  • The median expected household income and the median household spending growth expectations remained unchanged at 2.8% and 3.2%, respectively.
  • Perceptions of credit access compared to a year ago indicated greater dispersion, with the proportion of respondents reporting harder access increasing from 27.1% to 28.2% and the proportion of those reporting easier access also increasing from 23.7% to 24.1%. Expectations for year-ahead credit availability, on the other hand, improved slightly in August, with the proportion expecting improving conditions in credit access increasing from 19.7% to 21.1%.
  • The average perceived probability of missing a minimum debt payment over the next three months increased from 11.8 % in July to 12.8% in August, reaching its highest level since October 2017. The increase was broad-based across education and income groups.
  • The mean perceived probability that the average interest rate on saving accounts will be higher 12 months from now than it is today declined from 36.0% in July to 35.2% in August.
  • Perceptions of households’ financial situations compared to a year ago were largely unchanged. One-year ahead expectations of households’ financial situations improved considerably with 44.5% of respondents expecting to be better off financially, compared to 41.4% in July and 11.0% expecting to be worse off financially, compared to 12% in July.
  • The mean perceived probability that U.S. stock prices will be higher 12 months from now than they are today declined slightly from 40.3% in July to 40.0% in August, remaining below its trailing 12-month average of 42.4%.
  • Median year-ahead expected growth in government debt increased from 6.9% in July to 7.9% in August the highest reading since November 2015.
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