Press Release
Near-Term Inflation Expectations Rise, While Expected Earnings Growth Dips
June 8, 2015

NEW YORK—The results from the May 2015 Survey of Consumer Expectations indicate that median one-year ahead inflation expectations rose to 3.0 percent. Median earnings growth expectations declined for the second consecutive month to 2.3 percent, driven by younger and higher income workers. On the other hand, median household income and spending growth expectations increased slightly, with more pronounced increases for lower income households.

Other findings from the May 2015 Survey include:

Inflation

  • Median one-year ahead inflation expectations increased to 3 percent from 2.7 percent in April. Median three-year ahead expectations remained stable at 3 percent, while inflation uncertainty declined slightly at the three-year ahead horizon.
  • The median expected home price change has remained essentially flat at 3.3 percent. The expected home price change has been gradually declining from 4 percent from a year ago. At the regional level, expected home price appreciation has risen somewhat in the West and Midwest, and declined in the South and Northeast.
  • Gas inflation expectations have continued to rebound to 5.8 percent from the significant decline observed in Fall 2014. Expectations for changes in medical care costs and the cost of college education have declined significantly to 7.6 percent and 6.7 percent respectively. These are the lowest points in both cases since the survey began in June 2013.   

Labor Market

  • Median one-year ahead earnings growth expectations declined to 2.3 percent from 2.45 percent in April and 2.6 percent in March. This decline was driven by younger workers and respondents with incomes above $100,000.
  • Job separation expectations decreased slightly: the mean perceived probability of losing one’s job has been declining since September 2014 and reached a new low in May at 13.8 percent. However, the mean perceived probability of leaving one’s job voluntarily (typically an indicator of prospective wage growth) has also declined slightly to 20.3 percent from 20.7 percent in April.
  • The mean perceived job finding probability (in the next three months, conditional on losing one’s job today) remained essentially unchanged at 54.2 percent, towards the high end of the range observed since the inception of the survey. The gap in perceived job finding probability widened across age groups, with the mean probability improving to 64.7 percent for workers under 40 but declining to 30.8 percent for workers 60 years and older.

Household Finance

  • The median one-year ahead household income growth expectation increased slightly to 2.9 percent, matching the series’ high attained in March. Income growth expectations improved particularly for respondents 40 to 60 years old, and for lower-income households.
  • Median one-year ahead household spending expectations increased to 4.0 percent from 3.8 percent in April, but remained at the low end of the (3.8 percent - 5.0 percent) range observed since the beginning of the survey. The 25th percentile of expected spending growth declined to 0.7 percent, a new series low. Spending growth expectations improved for younger, lower-income and lower-education respondents and worsened for college educated and high-income respondents.
  • The perceived change in credit availability compared to a year ago improved slightly from April, while the expected change in credit availability one year from now remained essentially unchanged. The average probability of missing a minimum debt payment over the next three months decreased by 0.6 percentage points to 11.4 percent, maintaining its overall declining trend and reaching a new series low.

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