US Consumers Brace For Higher Inflation, Home Price Surge: New York Fed Survey

Zinger Key Points
  • US consumer anticipates notable increases in commodity prices, particularly for gas, food, and medical care.
  • Home price growth expectations surge to 3.3%, the highest in nearly two years.

The latest Survey of Consumer Expectations (SCE) from the Federal Reserve Bank of New York shows American consumers are bracing for increased inflation and the fastest home price growth in nearly two years, alongside an evolving outlook on the labor market and taxes.

Key Findings From New York Fed’s SCE April 2024 Survey

Inflation Trends:

  • Short-Term Inflation Expectations: Median inflation expectations have risen from 3.0% to 3.3% over a one-year horizon. That’s still below the 12-month trailing average of 3.5%. The data appears to broadly align with the most recent University of Michigan consumer sentiment index, which showed that year-ahead inflation expectations increased from 3.2% in April to 3.5% in May.
  • Medium-Term Inflation Outlook: There’s a slight decline in inflation expectations at the three-year horizon, down from 2.9% to 2.8%.
  • Long-Term Inflation Expectations: For the five-year horizon, expectations increased from 2.6% to 2.8%.

Home Price Growth:

  • Median Home Price Growth Expectations: Jumped from 3.0% to 3.3%, the highest since July 2022, with significant increases among those with a high school education or less.

Commodity Price Expectations:

  • Gas Prices: Expected to rise by 4.8%, up 0.3 percentage points.
  • Food Prices: Forecast to increase to 5.3%, up 0.2 percentage points.
  • Medical Care Costs: Anticipated to grow by 8.7%, a rise of 0.6 percentage points.
  • College Education Costs: Expected surge by 9.0%, up by 2.5 percentage points.
  • Rent: Projected to rise by 9.1%, an increase of 0.4 percentage points.

Labor Market Insights:

  • Expected Earnings Growth: Median growth decreased slightly from 2.8% to 2.7%.
  • Unemployment Rate Expectations: Mean probability that the unemployment rate will be higher in one year increased from 36.2% to 37.2%.
  • Job Loss Probability: The perceived probability of losing a job in the next 12 months fell from 15.7% to 15.1%.
  • Voluntary Job Separation: Likelihood of leaving a job voluntarily dropped from 20.6% to 19.4%.
  • Job Finding Probability: Perceived chances of finding a job after losing one declined to 50.9%, the lowest since April 2021.

Household Financial Prospects:

  • Household Income Growth: Expected growth declined slightly from 3.1% to 3.0%.
  • Household Spending Growth: Expectations rose from 5.0% to 5.2%.
  • Credit Access Perceptions: Improved compared to a year ago, with fewer respondents expecting tighter conditions.
  • Debt Payment Challenges: The probability of missing a minimum debt payment remains steady at 12.9%.
  • Expected Tax Changes: Median expected increase in taxes at the current income level edged up from 4.2% to 4.3%.
  • Government Debt Expectations: Stayed unchanged at 9.6%.

Interest Rates and Stock Market Outlook:

  • Interest Rates on Savings: Mean probability that rates will be higher in 12 months rose from 24.2% to 25.5%.
  • Stock Market Performance: Expected probability that U.S. stock prices will be higher in 12 months decreased slightly from 39.2% to 38.7%.

Consumer Sentiments:

  • Financial Situation Compared to Last Year: More consumers report being worse off than a year ago.
  • Future Financial Expectations: Slight deterioration in the share of respondents expecting to be better off next year.

Now Read: April Inflation Data Preview – Why Analysts Expect Price Pressures To Cool

Image: Midjourney

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