Press Release

Medium-Term Inflation Expectations Rebound, Labor Market and Spending Growth Expectations Strengthen

July 10, 2017

NEW YORK—Results from the June 2017 Survey of Consumer Expectations show that inflation expectations fell slightly at the one-year horizon but increased noticeably at the three-year horizon, reversing to a large extent the 0.4 percentage point drop in the prior month. Consumers’ outlook of the labor market and financial situation generally improved. Spending growth expectations rose sharply, while expected credit access and expected ability to make minimum debt payments improved. Median expected change in gasoline prices dropped to its lowest level since January 2016.

The main findings from the June 2017 Survey are:

Inflation

  • Median inflation expectations decreased slightly at the one-year horizon from 2.6% in May to 2.5% in June and rebounded noticeably from 2.5% in May to 2.8% in June at the three-year ahead horizon. The decline at the one-year horizon was largely driven by higher income (annual incomes of higher than $100,000) respondents, while the rise at the three-year ahead horizon was driven by younger (age under 40) respondents.
  • Median inflation uncertainty (that is, the uncertainty expressed by respondents regarding future inflation outcomes) bounced back from the series’ lows at both horizons.
  • Median one-year ahead home price change expectations remained essentially flat at 3.5%, well above the series average for 2015 (3.2%) and 2016 (3.1%).
  • Median one-year ahead expected gasoline price change declined from 4.4% in May to 3.8% in June, the lowest level since January 2016. Expectations for changes in the cost of medical care, rent, college education and food prices were largely stable.

Labor Market

  • Median one-year ahead expected earnings growth expectations rebounded from 2.2% in May to 2.5%, remaining between the 2.0-2.5% band observed since late-2015. This was driven by respondents with annual incomes between $50,000-$100,000.
  • Mean unemployment expectations (that is, the mean probability that the U.S. unemployment rate will be higher one year from now) retreated somewhat from 37.5% in May to 36.3%.
  • The mean perceived probability of losing one’s job in the next 12 months declined slightly from 13.6% in May to 13.5%. The mean probability of leaving one’s job voluntarily in the next 12 months bounced back from 19.4% in May, its lowest level since July 2013, to 20.8%.
  • The mean perceived probability of finding a job (if one’s current job were lost) increased from 56.7% in May to 59.2%. The rise was broad-based across all education and income groups.

Household Finance

  • Median expected household income growth was unchanged from the previous month at 2.7%. Median household spending growth expectations rose sharply from 2.6% in May to 3.3% in June, returning to early 2017 levels. The rise was fairly broad-based across all education and income groups.
  • The perceived change in credit availability compared to a year ago became more polarized. On the other hand, year-ahead expected credit availability improved somewhat.
  • The average perceived probability of missing a minimum debt payment over the next three months decreased from 13.1% in May to 12.0%. The decline was broad-based across income groups.
  • The mean perceived probability that the average interest rate on saving accounts will be higher 12 months from now fell slightly from 37.2% in May to 36.8% in June. This is the lowest level seen in 2017, but it remains substantially higher than the 2016 average of 30.9%.
  • The proportion of respondents reporting to be better off financially compared to a year ago reached a new series high of 34.8%, with 16.9% reporting to be worse off. Expectations regarding households’ financial status a year from now improved as well.
  • The mean perceived probability that U.S. stock prices will be higher 12 months from now declined from 44.0% in May to 43.6%. 
  • Median year-ahead expected growth in government debt declined from 5.4% in May to 4.9%, remaining well below the 2016 average of 5.8%.  

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 1,300 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.

Contact
Betsy Bourassa
(212) 720-6885
betsy.bourassa@ny.frb.org