Consumers expect an uptick in short-term inflation, but longer-term decline, according to the Federal Reserve Bank of New York’s monthly Survey of Consumer Expectations. Respondents also weighed in on the labor market expectations, income growth and household financials in the year ahead.
Median one-year-ahead inflation expectations rose to a high of 6.6% from 6% in February, while median three-year-ahead inflation expectations decreased to 3.7% from 3.8%. The increase in short-term expectations was broad-based across age, education and income groups, while the decline in medium-term expectations was driven by respondents with no college education and with annual household incomes under $50,000.
Median expected changes in home prices one year from now increased slightly to 6% from 5.7%. The measure has been elevated for the past year and remains above its pre-pandemic 3% level in February 2020. Median one-year-ahead expected earnings growth remained unchanged at 3% in March for the third consecutive month. Expectations that unemployment will be higher one year from now increased by 1.7 points to 36.2%, its highest level since February 2021. The increase was evenly distributed across age, education and income.
Expected growth in household income fell by 0.2 in March to 3%, its lowest since August 2021. Median year-ahead household spending growth expectations jumped 1.3 percentage points to 7.7%, a new series high. The increase was broad based but was largest for respondents with a college degree and annual household incomes above $100,000. Perception of households’ current financial situations compared to last year deteriorated in March. Respondents were also more pessimistic about household finances in the year ahead, with fewer respondents expecting improvements in a year.