Press Release

Inflation Expectations Stable in November; Home Price and Earnings Expectations Decline

December 10, 2018

NEW YORK—The Federal Reserve Bank of New York’s Center for Microeconomic Data released the November 2018 Survey of Consumer Expectations, which shows little change in short- and medium- term inflation expectations, but generally more pessimistic housing and labor market expectations. In particular, expectations about home prices continued their downward trend, while earnings and unemployment expectations deteriorated for the second consecutive month.

The main findings from the November 2018 Survey are:

Inflation

  • The median one-year ahead expected inflation rate was unchanged for the eighth straight month, at 3.0%, while expectations at the three-year horizon dipped slightly, to 2.9%, from 3.0% in October. Inflation uncertainty increased slightly at both the one- and three-year horizons.
  • Median home price change expectations decreased 0.2 percentage points, to 3.1%. After solid gains in the first half of the year, home price expectations have declined steadily from a high of 3.9% in June to the lowest level in the past 12 months in November. The decline is consistent across all regions except the Midwest.
  • The median one-year ahead expected gasoline price change dropped to 4.2%—the lowest level since December 2017—from 4.5% in October. Expectations for changes in the cost of medical care rose to 9.1%, from 7.8% in October. Expectations for changes in the cost of college education increased by 0.4 percentage points, to 6.3%, while expectations for changes in food prices decreased by 0.2 percentage points, to 4.3%.

Labor Market

  • Median one-year ahead earnings growth expectations dropped sharply for the second consecutive month, to 2.0%, from 2.5% in October, reaching the lowest level since February 2017. The decrease was most pronounced among respondents living in the Northeast and West and respondents older than 60. Earnings growth uncertainty also decreased for the second consecutive month.
  • Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—increased by 0.7 percentage points, to 35.8%, and remain above the 12-month trailing average of 34.0%.
  • The mean perceived probability of losing one’s job in the next 12 months increased by 1.2 percentage points, to 14.7% (just above the 12-month trailing average of 14.1%), while the mean probability of leaving one’s job voluntarily in the next 12 months increased by 2.0 percentage points, to 22.8%.
  • The mean perceived probability of finding a job (if one’s current job was lost) was relatively stable, at 58.6%, versus 58.7% in October, and remains near the series peak of 60.1%, reached in November 2017.

Household Finance

  • In contrast to the decline in earnings growth expectations, median expected household income growth increased slightly, to 3.0%, from 2.9% in October, matching the previous series high.
  • After a sharp increase last month, median household spending growth expectations decreased by 0.2 percentage points in November, to 3.5%, but stayed above the 12-month trailing average of 3.2%.
  • The median expectation regarding year-ahead change in taxes (at current income level) maintained the upward trend started in March 2018, increasing 0.2 percentage points in November, to 2.7%.  
  • The perceived change in credit availability compared to a year ago worsened slightly in November, with the proportion of respondents reporting easier credit access falling to 26.0%, from 26.6% in October. Expectations for year-ahead credit availability remained stable.
  • The average perceived probability of missing a minimum debt payment over the next three months declined 0.7 percentage points in November, to 12.0%.
  • The mean perceived probability that the average interest rate on savings accounts will be higher 12 months from now than it is today decreased to 37.3%, from 38.4% in October, staying above the 12-month trailing average of 36.1%.
  • One-year ahead expectations about households’ finances worsened slightly in November, with 12.5% of respondents expecting to be worse off financially, compared to 11.0% in October.
  • The mean perceived probability that U.S. stock prices will be higher 12 months from now than they are today decreased to 39.8%, from 41.6% in October, continuing the negative trend that started at the beginning of the year.

 
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 12 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.

Contact
Brian Manning
(212) 720-6143
brian.manning@ny.frb.org