Press Release

Medium Term Inflation Expectations Rise; Consumers’ Outlook Less Optimistic in September

October 10, 2017

NEW YORK—Results from the September 2017 Survey of Consumer Expectations show increased pessimism. In particular, expectations about earnings, spending, income growth, home prices, financial situations and the stock market all deteriorated. Inflation expectations at the three-year horizon increased, while one-year ahead inflation expectations remained unchanged.

The main findings from the September 2017 Survey are:

Inflation

  • Median inflation expectations remained unchanged in the short-term, but ticked up in the medium term: The one-year ahead median inflation expectations stayed at 2.5%, while the three-year ahead median inflation expectations increased 0.2 percentage points to 2.8% in September. This increase was driven by respondents between ages 40 and 60.
  • Median home price change expectations fell from 3.3% in August to 3.0%, its lowest level since March 2016. The decrease was consistent across demographic groups.
  • The median one-year ahead expected gasoline price change increased from 4.1% in August to 4.7%. Expectations for changes in the cost of a college education dropped notably from 6.7% to 5.9%, just above its series low of 5.8% reached in May 2016.

Labor Market

  • Median one-year ahead earnings growth expectations decreased 0.2 percentage point to 2.3% in September. This is the second consecutive drop since reaching 2.6% in July 2017. The decline was largest for younger (under age 40) and lower-educated (with a high school degree or less) respondents.
  • Mean unemployment expectations (the mean probability that the U.S. unemployment rate will be higher one year from now) increased 0.3 percentage points to 35.7% in September.
  • The mean perceived probability of losing one’s job in the next 12 months remained unchanged at 13.8% while the mean probability of leaving one’s job voluntarily in the next 12 months ticked down 1.1 percentage point to 20.6%.
  • The mean perceived probability of finding a job (if one’s current job was lost) increased from 58.3% to 59.2%, just below the series high of 59.3% reached in March 2017.

Household Finance

  • Median expected household income growth fell sharply from 2.7% in August to 2.2%, the lowest level recorded since February 2014 and well below the series high of 3.0% in July 2017. The decline was especially pronounced for younger and lower-educated respondents.
  • Median household spending growth expectations also fell, from 3.0% in August to 2.7%. Again, the decline was especially pronounced for younger and lower-educated respondents.
  • Both the perceived change in credit availability compared to a year ago and the year-ahead expected credit availability deteriorated slightly.
  • The average perceived probability of missing a minimum debt payment over the next three months increased for the third month in a row, from 12.0% in June to 13.4% in September.
  • The mean perceived probability that the average interest rate on saving accounts will be higher 12 months from now fell 0.6 percentage points in September to 33.8%.
  • The proportion of respondents who perceive being better off financially compared to a year ago declined from 32.6% in August to 32.3%, while the proportion of respondents who expect being better off financially a year from now declined from 42.3% in August to 40.3%.
  • The mean perceived probability that U.S. stock prices will be higher 12 months from now fell from its August level of 43.1% to 42.0%. 
  • Median year-ahead expected growth in government debt increased from 5.2% in August to 5.7%, the highest level since November 2016. 

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