Consumers’ Inflation and Labor Market Expectations Remain Largely Stable

NEW YORK-The Federal Reserve Bank of New York's Center for Microeconomic Data today released the August 2024 Survey of Consumer Expectations, which shows inflation expectations remained unchanged at the short- and longer-term horizons, and rebounded somewhat at the medium-term horizon after a sharp decrease last month. Labor market expectations were mixed, but largely stable. Households were more optimistic about the availability of credit a year from now. Delinquency expectations rose slightly again, to the highest level since April 2020.

The main findings from the August 2024 Survey are:

Inflation

• Median inflation expectations at the one- and five-year horizons remained unchanged in August at 3.0% and 2.8%, respectively. Median inflation expectations at the three-year horizon rebounded somewhat from the low July reading, increasing from 2.3% to 2.5%. The survey's measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) increased at all three horizons.
• Median inflation uncertainty-or the uncertainty expressed regarding future inflation outcomes-was unchanged at the one-year horizon and declined at the three- and five-year horizons.
• Median home price growth expectations increased to 3.1% from 3.0% in July.
• Median year-ahead expected price changes increased by 0.1 percentage point to 3.6% for gas, by 0.2 percentage point to 7.3% for rent, and 0.4 percentage point to 8.0% for medical care, but declined by 0.3 percentage point to 4.4% for food and 1.3 percentage points to 5.9% for the cost of a college education.

Labor Market

• Median one-year-ahead expected earnings growth increased to 2.9% from 2.7%, just above its 12-month trailing average of 2.8%. The increase was most pronounced for respondents in households with less than $50,000 annual income.
• Mean unemployment expectations-or the mean probability that the U.S. unemployment rate will be higher one year from now-increased to 37.7% from 36.6% in July.
• The mean perceived probability of losing one's job in the next 12 months decreased by 1.0 percentage point to 13.3%, falling below the 12-month trailing average of 13.7%. The mean probability of leaving one's job voluntarily in the next 12 months also decreased, to 19.1% from 20.7%, falling slightly below the 12-month trailing average of 19.4%.
• The mean perceived probability of finding a job if one's current job was lost decreased by 0.2 percentage point to 52.3%, remaining below the 12-month trailing average of 53.9% and well below its year-ago reading of 55.7%.

Household Finance

• Median expected growth in household income increased by 0.1 percentage point to 3.1%, remaining within the narrow range of 3.0% to 3.1% the series has maintained for the past year.
• Median household spending growth expectations increased by 0.1 percentage point to 5.0%. The series has moved within a narrow range of 4.9% to 5.2% since November 2023, remaining well above its February 2020 level of 3.1%.
• Perceptions of credit access compared to a year ago improved with a smaller share reporting tighter conditions compared to a year ago. Expectations about future credit access also improved, with a smaller share of respondents expecting tighter credit conditions a year from now, and a larger share expecting easier conditions. The shares reporting or expecting worse credit conditions are at their lowest levels since early 2022, while the share expecting improved credit availability is at its highest level since September 2021.
• The average perceived probability of missing a minimum debt payment over the next three months increased by 0.3 percentage point to 13.6%, its third consecutive increase. The current reading is the highest since April 2020.
• The median expected year-ahead change in taxes at current income level declined by 0.1 percentage point to 3.9%.
• Median year-ahead expected growth in government debt decreased to 9.1% from 9.3%.
• The mean perceived probability that the average interest rate on saving accounts will be higher in 12 months increased by 1.5 percentage points to 26.6%.
• Perceptions about households' current financial situations deteriorated slightly with fewer respondents reporting being better off than a year ago and more respondents reporting being worse off. Year-ahead expectations also deteriorated somewhat, with a larger share of respondents expecting to be worse off. Overall, respondents remain considerably more optimistic about their financial situation compared to a year ago.
• The mean perceived probability that U.S. stock prices will be higher 12 months from now remained unchanged at 39.3%.

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, the interactive chart guide, and the survey questionnaire.

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