NATNews Blog > April 2016 > Consumer Inflation Expectations Decline

    Consumer Inflation Expectations Decline

    4/27/2016 8:46:44 AM
    The March 2016 Survey of Consumer Expectations (SCE) results, recently released by the Federal Reserve Bank of New York, indicate a decline in median inflation expectations at both the one-year and the three-year ahead horizons. The median expected change in gasoline prices increased sharply. Median expected household spending growth declined, while expected household income growth rose slightly. Labor market expectations were mixed, with earnings growth expectations remaining stable while the mean perceived probability of losing a job and that of finding a job (if current job were lost) both increased slightly.

    Median inflation expectations declined at both the one-year (to 2.5 percent from 2.7 percent in February) and the three-year ahead horizon (to 2.5 percent from 2.6 percent in February). The decline at the one-year horizon was concentrated among household heads with lower education, income and numeracy.
    Median inflation uncertainty (that is, the uncertainty expressed by respondents regarding future inflation outcomes) decreased at both the one-year and the three-year ahead horizons, with both reaching new series lows.
    Median home price change expectations decreased slightly to 3.0 percent, essentially in line with the readings that have prevailed since August 2015.
    The median year ahead expected gasoline price change rose significantly to 7.3 percent, perhaps reflecting recent increases at the pump and indicating that consumers expect further increases in gas prices.
    Expectations for price changes in other items remained fairly stable, with the median expected price change for food, rent and medical care declining slightly and that for college education rising slightly.
    Labor Market
    Median one-year ahead expected earnings growth remained essentially unchanged at 2.5 percent, remaining at the high end of the (1.8 percent - 2.7 percent) range observed since the inception of the survey. Expected earnings growth weakened for lower educated workers and strengthened for higher educated workers.
    The mean perceived probability of losing one's job in the next 12 months rose slightly to 14.4 percent from 13.8 percent in February, remaining within the tight range of 12.7 to 15.0 percent seen over the previous twelve months. This was accompanied by a decline in the mean perceived probability of leaving one's job voluntarily (from 21.3 percent to 20.0 percent).
    The mean perceived probability of finding a job (if current job were lost) increased marginally from 53.9 percent to 54.3 percent, remaining slightly below the average of 55.1 percent observed in the previous 12 months. The increase was driven primarily by higher educated respondents.
    Household Finance
    Median expected household income growth rose slightly to 2.6 percent from 2.5 percent in February, continuing the rebound observed in February but remaining below values recorded during Spring and Summer 2015. Consistent with the findings for earnings growth, expected household income growth weakened for lower education household heads and firmed up for higher education ones.
    On the other hand, median household spending growth expectations declined from 4.0 percent to 3.4 percent, partly reversing the sharp rebound recorded in February and falling in line with the average reading over the second half of 2015.
    Perceived (over the past 12 months) and expected (over the coming 12 months) credit availability improved slightly, while the average perceived probability of missing a minimum debt payment over the next three months decreased slightly from 11.8 percent to 11.5 percent, printing below the average reading over the past 12 months.
    The mean perceived probability of a higher average year-ahead interest rate on savings accounts decreased from 30 to 28 percent, returning to values that prevailed through much of 2014 and early 2015.
    While perceived household financial situation improved slightly compared to a year ago, the shares of respondents expecting either better or worse future conditions over the coming 12 months both declined, with more expecting no change.
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    Reprinted with permission from RISMedia. ©2016. All rights reserved.