April 10 — In the Federal Reserve Bank of New York’s Center for Microeconomic Data’s March 2018 Survey of Consumer Expectations, expectations for short- and medium-term inflation remained steady. However, consumers were less optimistic about labor market outcomes — particularly income growth expectations, the U.S. unemployment rate and the probability of losing one’s job — which declined in the latest survey results.
Median inflation expectations (at both 1- and 3-year horizons) remain the same from the previous survey, at 2.8 and 2.9 percent, respectively. Uncertainty expressed by respondents regarding future inflation outcomes did increase slightly at both horizons, rising from the series’ lows they had reached in the previous assessment. Median home price change expectations increased 0.2 percentage points t0 3.5 percent last month, remaining above the 2017 average of 3.2 percent.
Commodities price expectations were little changed with median one-year ahead expected gas price change increasing 0.3 percentage points to 4.6 percent. Median expected change in food prices increased to 4.5 percent, up 0.2 percentage points from the previous survey. Expectations for change in the cost of college education and medical care declined for the fourth consecutive month, from 8.0 percent and 9.7 percent in November to 5.9 percent and 8.8 percent in March, respectively.
Driven by respondents with an annual income below $50,000, the median one-year ahead earnings growth expectations declined somewhat, falling from 2.7 percent in February to 2.6 percent in the current survey. In addition to respondents’ reduced confidence in income growth, mean unemployment expectations increased 2.1 percentage points, hitting 34.4 percent in the March survey. This number is still below the 2017 average of 35.7 percent, however.
Concerns about job loss also rose. The mean perceived probability of losing one’s job in the next 12 months increased from 12.8 percent to 13.9 percent, and the mean perceived probability of finding a job (if one’s current job was lost) fell from 59.7 percent to 57.6 percent, below the 2017 average of 58 percent. The mean probability of leaving one’s job voluntarily in the next 12 months declined from 21.4 percent to 19.3 percent, the lowest level seen since July 2013.
Led by younger (under 40 years old) and lower income (annual income below $50,000) respondents, median expected household income growth decreased 0.1 percentage points to 2.9 percent. However, median household spending growth expectations improved slightly, up to 3.1 percent in March, and perceptions about household financial situations improved slightly. The proportion of respondents who reported feeling better off than a year ago increased 0.2 percentage points to 40.4 percent. And yet, expectations for household financial situations fell, with the proportion of respondents expecting to be worse off financially a year from now increasing 1.7 percentage points to 11.8 percent in March.
Perceptions and expectations regarding credit availability fell again in March. The number of consumers who felt that credit has become easier to obtain (compared to 12 months ago) declined 3.7 percentage points to 21.7 percent, and the proportion of respondents who expect credit to become easier to get in 12 months fell 3.3 percentage points to 19.4 percent. Interestingly, driven by middle-aged respondents (ages 40-60) the average perceived probability of missing a minimum debt payment over the next three months continues to decrease, falling to 10.7 percent in March, the sixth consecutive month of decrease. Respondents also feel that interest rates on savings accounts will be higher 12 months from now with the mean perceived probability for this measure hitting 37.1 percent, the fifth straight month of increase.
Stock prices did not fair as well. The mean perceived probability that U.S. stock prices will be higher 12 months from now declined from 43 percent in February to 42 percent in March, remaining below its trailing 12-month average of 43.4 percent.
Expectations for changes in year-ahead taxes (at current income level) increased for the first time since October 2017, reaching 1.7 percent, but they remain below the 2017 average of 2.3 percent. Median year-ahead expected growth in government debt fell from 7.5 percent in the previous survey to 7.0 percent in the current assessment, but it remains above the 2017 average of 5.6 percent.
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