Delinquency Expectations Continue to Deteriorate; Inflation Expectations Tick Up at the Medium and Longer Term Horizons

NEW YORK-The Federal Reserve Bank of New York's Center for Microeconomic Data today released the September 2024 Survey of Consumer Expectations, which shows that inflation expectations remained unchanged at the short-term horizon while increasing slightly at the medium- and longer-term horizons. The average perceived likelihood of a voluntary job separation and the perceived likelihood of finding a job in the event of a job loss increased. While year-ahead household income and spending growth expectations both slightly declined, perceptions and expectations about credit access improved. Delinquency expectations continued its upward trend and increased to the measure's highest level since April 2020.

The main findings from the September 2024 Survey are:

Inflation

• Median inflation expectations remained unchanged at 3.0% at the one-year horizon, increased to 2.7% from 2.5% at the three-year horizon, and increased to 2.9% from 2.8% at the five-year horizon. The increases at the three- and five-year horizons were most pronounced for respondents with at most a high school degree. The survey's measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations)decreased at the one-year horizon, increased at the three-year horizon and remainedunchanged at the five-year horizon.
• Median inflation uncertainty-or the uncertainty expressed regarding future inflation outcomes-declined at the one- and three-year horizons and increased at the five-year horizon.
• Median home price growth expectations decreased by 0.1 percentage point to 3.0%. The series has been moving in a narrow range between 3.0 to 3.3% since August 2023.
• Year-ahead commodity price expectations increased by 0.1 percentage point for food to 4.5% and remained unchanged for the cost of college at 5.9%. They declined by 0.2 percentage point for gas to 3.4%, by 1.4 percentage point for the cost of medical care to 6.6% (the measure's lowest reading since February 2020), and by 1.0 percentage point for rent to 6.3%.

Labor Market

• Median one-year-ahead expected earnings growth decreased by 0.1 percentage point to 2.8%. The current reading equals the 12-month trailing average of 2.8%.
• Mean unemployment expectations-or the mean probability that the U.S. unemployment rate will be higher one year from now-declined by 1.5 percentage points to 36.2% in September. The decline was broad-based across education and household income groups.
• The mean perceived probability of losing one's job in the next 12 months remained unchanged at 13.3%. The mean probability of leaving one's job voluntarily in the next 12 months increased to 20.4% from 19.1%. The increase was most pronounced among respondents below age 40.
• The mean perceived probability of finding a job if one's current job was lost increased to 52.7% from 52.3% in August. The series remains below its 12-month trailing average of 53.6%.

Household Finance

• Median expected growth in household income declined by 0.1 percentage point to 3.0%. The series has been moving within a narrow range of 3.0% to 3.1% since September 2023 and remains above the February 2020 pre-pandemic level of 2.7%.
• Median household spending growth expectations decreased by 0.1 percentage point to 4.9%.
• Perceptions of credit access compared to a year ago improved with a smaller share of respondents reporting tighter conditions and a larger share reporting improved credit availability compared to a year ago. Expectations about credit access a year from now also improved with a smaller share of respondents expecting tighter credit and a larger share expecting looser credit a year from now. The share of respondents expecting looser credit conditions a year from now reached the measure's highest level since May 2020.
• The average perceived probability of missing a minimum debt payment over the next three months increased for the fourth consecutive month to 14.2% from 13.6% in August. This is the highest reading of the series since April 2020. The increase was most pronounced for respondents between ages 40 and 60 and those with annual household incomes above $100k.
• The median expected year-ahead change in taxes at current income level increased by 0.1 percentage point to 4.0%.
• Median year-ahead expected growth in government debt declined by 1.1 percentage points to 8.0%, reaching the measure's lowest level since February 2020.
• The mean perceived probability that the average interest rate on saving accounts will be higher 12 months from now decreased by 1.5 percentage points to 25.1%.
• Perceptions about households' current financial situations deteriorated with fewer respondents reporting being better off and more respondents reporting being worse off than a year ago. Year-ahead expectations improved with a smaller share of respondents expecting to be worse off and a larger share expecting to be better off a year from now.
• The mean perceived probability that U.S. stock prices will be higher 12 months from now increased by 1.0 percentage point to 40.3%.

About the Survey of Consumer Expectations (SCE)
The SCE contains information about how consumers expect overall inflation and prices for food, gas, housing, and education to behave. It also provides insight into Americans' views about job prospects and earnings growth and their expectations about future spending and access to credit. The SCE also provides measures of uncertainty regarding consumers' outlooks. Expectations are also available by age, geography, income, education, and numeracy.

The SCE is a nationally representative, internet-based survey of a rotating panel of approximately 1,300 household heads. Respondents participate in the panel for up to 12 months, with a roughly equal number rotating in and out of the panel each month. Unlike comparable surveys based on repeated cross-sections with a different set of respondents in each wave, this panel allows us to observe the changes in expectations and behavior of the same individuals over time. For further information on the SCE, please refer to an overview of the survey methodology here, the interactive chart guide, and the survey questionnaire.

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