Press Release
Consumers Expect Lower Short-Term Inflation and Spending Growth
May 11, 2015

NEW YORK—The results from the April 2015 Survey of Consumer Expectations indicate that one-year ahead inflation expectations fell while three-year ahead inflation expectation increased slightly. The median one-year and three-year ahead expected rates of inflation now stand at 2.7 percent and 3.0 percent, respectively. While earnings and household income growth expectations were largely unchanged, median household spending growth expectations retreated substantially to the series low reached in February 2015.

Other findings from the April 2015 Survey include:

Inflation

  • The median one-year ahead expected rate of inflation fell from 2.9 percent to 2.7 percent, a new series low, while the median three-year ahead expected rate of inflation increased slightly from 2.9 percent to 3.0 percent.
  • The median one-year ahead house price inflation expectation remained stable at 3.4 percent. At a regional level, the median expected house price inflation fell by 0.3 percentage points in the West and Midwest, while it increased by 0.5 and 0.2 percentage points in the South and North East, respectively.
  • Median expectations about one-year ahead gasoline price changes declined by 0.3 percentage points to 5.7 percent. Food and rent inflation expectations increased slightly.

Labor Market

  • After a strong increase in March, the median one-year ahead earnings growth expectation decreased marginally from 2.6 percent to 2.5 percent, remaining at the high end of the range observed since the start of the series. There was considerable heterogeneity across age groups, with the median earnings growth expectation increasing slightly for those under age 40, and falling for those older than 40.
  • Job separation expectations decreased moderately. The average perceived probability of leaving one’s job voluntarily decreased by 0.8 percentage points to 20.7 percent, while the average perceived probability of losing one’s job decreased by 0.2 percentage points to 14.8 percent.
  • The mean probability of finding a job in the next three months (conditional on losing one’s job today) decreased slightly to 54.4 percent, but remain at the high end of the range observed since the inception of the survey in June 2013.

Household Finance

  • The median one-year ahead household income growth expectation decreased slightly to 2.8 percent, remaining close to the series’ high attained in March.
  • After a marked rebound last month, one-year ahead household spending expectations dropped sharply, returning to the February level of 3.8 percent, tying a series low. The 25th percentile of expected spending growth dropped to 0.8 percent. The decline in expected spending growth was widespread, but strongest among lower-income and lower-educated respondents.
  • Expected (and perceived) change in credit availability a year from now or compared to a year ago remained essentially unchanged compared to the previous month. The average probability of missing a minimum debt payment over the next three months decreased by 0.3 percentage points to 12.0 percent, maintaining its overall declining trend.

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