Report: Household spending expectations fall sharply in September

Consumers’ inflation expectations continued to decline in the short term but increased slightly in the medium and longer terms, according to the Federal Reserve Bank of New York’s monthly Survey of Consumer Expectations released today. Household spending expectations fell sharply, posting their largest one-month decline since the survey’s inception in June 2013. Households’ expectations about future credit access one year from now improved somewhat.

Median one-year-ahead inflation expectations declined in September, falling by 0.3 percentage points to 5.4%, its lowest reading since September 2021, according to the report. Still, three-year-ahead inflation expectations rose slightly to 2.9% from 2.8% in August. Median five-year-ahead inflation expectations rose to 2.2% from 2%.

Expectations about year-ahead price changes rose by 0.4 percentage points to 0.5% for gas, one percentage point to 6.9% for food, and 0.1 percentage points to 9.7% for rent. The median expected growth in household income was unchanged in September at its high of 3.5%. However, the median household spending growth expectations fell sharply to 6% from 7.8% in August.

Perceptions of credit access compared to a year ago were roughly unchanged, but the share of households reporting it is harder to obtain credit than one year ago remains at a series high, according to the report. In contrast, expectations for future credit availability improved, with the share of respondents expecting it will be harder to obtain credit in the year ahead falling sharply.