Consumer inflation expectations in the U.S. have remained stable in August, with median one- and five-year ahead inflation expectations both rising by 0.1 percentage point to 3.6% and 3.0% respectively, according to the Federal Reserve Bank of New York's August Survey of Consumer Expectations published on Monday. However, the three-year ahead inflation expectation fell by 0.1 percentage point to 2.8%.
The survey also revealed a growing concern about job prospects and credit availability among consumers. The mean perceived probability of losing one's job in the next 12 months jumped by 2.0 percentage points to 13.8%, marking the highest reading since April 2021. Concurrently, the mean probability of voluntarily leaving a job within the same period increased by 1.9 percentage points to 18.9%.
Consumers' optimism about finding a new job if their current one was lost dipped slightly, with the mean perceived probability edging down by 0.1 percentage point to 55.7%. The outlook for household finances also took a hit, with the median expected growth in household income falling by 0.3 percentage points to 2.9% in August, the lowest reading since July 2021.
Perceptions of credit access compared with a year ago dropped during August, with a higher proportion of households reporting that it’s harder to obtain credit than one year ago – a new series high. Additionally, expectations that credit will be even harder to come by in the future increased.
Despite these concerns, the average perceived probability of missing a minimum debt payment over the next three months fell by 0.6 percentage points to 11.1%, according to the New York Fed.
The survey also indicated that consumers expect the gap between their expected spending and their expected income growth to widen. Median household spending growth expectations slipped by 0.1 percentage point to 5.3%.
The Federal Reserve Bank of New York's survey, which is based on a rotating panel of 1,300 households, plays a critical role in informing how Federal Reserve policymakers respond to the inflation crisis. Fed Chair Jerome Powell has repeatedly stated that the central bank is committed to bringing inflation back down to its 2% target goal.
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