Consumers’ Inflation Expectations Dip Further
February 8, 2016

NEW YORK—The January 2016 Survey of Consumer Expectations (SCE) results indicate that median inflation expectations at both the one-year ahead and the three-year ahead horizons fell in January, with both reaching their lowest levels since the inception of the survey. Median expected changes in gasoline prices, medical care costs and the cost of a college education all declined. On the other hand, median expected earnings and spending growth both increased slightly, while median household income growth expectations were marginally lower. The mean perceived probability of finding a job (if one’s current job were lost) increased slightly, maintaining its gradual upward trend over the past two years.

The main findings from the January 2016 Survey are:


  • Median inflation expectations declined slightly at the one-year horizon (from 2.5 in December to 2.4 percent) and markedly at the three-year ahead horizon (from 2.8 in December to 2.5 percent). The 75th percentile of expected three-year ahead inflation declined 0.2 percentage points to 4.9 percent, its lowest level since the data series began in June 2013. The decline was concentrated among younger and older household heads, and those with lower education and income.
  • Median inflation uncertainty (that is, the uncertainty expressed by respondents regarding future inflation outcomes) increased at both the one-year and the three-year ahead horizons, retreating from their series lows in both cases.
  • Median home price change expectations remained stable at 3.0 percent in January.
  • Year ahead expected gasoline price change expectations dropped noticeably, with the median falling from 4.2 percent to 2.8 percent, returning to the low levels observed in fall 2014 and suggesting that respondents see current low prices as more permanent.
  • Expectations for changes in food prices increased marginally to 4.9 percent, while those for changes in medical care costs and the cost of a college education declined more substantially to 8.6 percent and 6.0 percent respectively—with both matching or reaching new series lows.

Labor Market

  • Median one-year ahead expected earnings growth rebounded slightly from 2.0 percent to 2.1 percent in January, but remains well below its 2015 average of 2.4 percent. The increase was driven by younger, lower income and lower educated workers.
  • The mean perceived probability of losing one’s job in the next 12 months increased slightly from 13.5 percent in December to 13.9 percent, remaining within the tight range of 12.7 to 15.0 percent seen over the past twelve months.
  • The mean perceived probability of leaving one’s job voluntarily increased from 20.1 to 21.4 percent, while the mean perceived probability of finding a job (if one’s current job were lost) increased from 55.1 percent to 56.0 percent, remaining at the high end of the range observed since the inception of the survey.

Household Finance

  • Median expected household income growth fell slightly compared to last month (from 2.3 percent to 2.2 percent), remaining well below its 2015 average of 2.7 percent and reaching a value not seen since the summer of 2014. The decline was driven by older and less educated respondents.
  • Median household spending growth expectations rebounded slightly from its new low reached in December, increasing from 2.9 percent in December to 3.0 percent.
  • There was a slight deterioration in perceived (over the past 12 months) and expected (over the coming 12 months) credit availability.
  • The average perceived probability of missing a minimum debt payment over the next three months decreased slightly to 11.8 percent, remaining close to its 2015 average of 12.0 percent.
  • The mean perceived probability of a higher average year-ahead interest rate on savings accounts decreased from 35 to 32 percent.

About the Survey of Consumer Expectations
The SCE contains information about how consumers expect overall inflation and prices for food, gas, housing and education to behave. It also provides insight into Americans’ views about job prospects and earnings growth and their expectations about future spending and access to credit. The SCE also provides measures of uncertainty in expectations for the main outcomes of interest. Expectations are also available by age, geography, income, education and numeracy. 

The SCE is a nationally representative, internet-based survey of a rotating panel of approximately 1,200 household heads. Respondents participate in the panel for up to twelve months, with a roughly equal number rotating in and out of the panel each month. Unlike comparable surveys based on repeated cross-sections with a different set of respondents in each wave, our panel allows us to observe the changes in expectations and behavior of the same individuals over time.

The survey is conducted on our behalf by The Demand Institute, a non-profit organization jointly operated by The Conference Board and Nielsen. The sampling frame for the SCE is based on that used for The Conference Board’s Consumer Confidence Survey (CCS). Respondents to the CCS, itself based on a representative national sample drawn from mailing addresses, are invited to join the SCE internet panel.

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