May 2017 Consumer Expectations: Spending Growth Outlook Remains At Low Point

from the New York Fed

The May 2017 Survey of Consumer Expectations shows that household inflation expectations declined at the one-year-ahead horizon and dropped noticeably at the three-year-ahead horizon.

Expectations for home prices continued to edge up. The outlook of consumers in several other areas showed few signs of optimism—spending growth expectations remained at their series low and perceived current and expected future financial situations worsened from the previous month.

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The main findings from the April 2017 Survey are:

Inflation

Inflation expectations declined at both horizons—dropping noticeably at the three-year ahead horizon. Median one-year ahead inflation expectations decreased from 2.8% in April to 2.6%. Median three-year ahead inflation expectations dropped from 2.9% in April to 2.5%, their lowest reading since January 2016. For both horizons, the declines were most notable for younger household heads (those less than 40 years old) and those with a high school degree or less. While expectations declined for all income groups, they were largest for lower-income households (below $50,000 household income). Inflation uncertainty at both horizons continues to remain at series low.

Median year-ahead home price change expectations continued their upward trend, reaching 3.5%, up from 3.4% in April and 3.1% in February this year. This was driven by an uptick in expectations for respondents residing in the Midwest.

Labor Market

Median one-year ahead earnings growth expectations decreased from 2.5% in April to 2.2%. This series has been oscillating between 2% and 2.5% since late-2015.

The mean perceived probability of losing one’s job in the next 12 months increased from 13.2% in April to 13.6%, still towards the lower end of the range seen since the start of the dataset in 2013. The increase was driven by respondents above the age of 60. The mean probability of leaving one’s job voluntarily in the next 12 months declined from 19.9% to 19.4%, its lowest level since July 2013.

The mean perceived probability of finding a job (if one’s current job was lost) was little changed, increasing slightly from 56.5% in April to 56.7%.

Mean unemployment expectations (the mean probability that the U.S. unemployment rate will be higher one year from now) edged up from 36.5% in April to 37.5%.