NEW YORK—The Federal Reserve Bank of New York's Center for Microeconomic Data released the January 2021 Survey of Consumer Expectations, which shows that households' year-ahead spending growth expectations rose to 4.2%, the highest level recorded in more than 5 years. In contrast, earnings growth expectations have remained flat for the sixth consecutive month. Labor market expectations continued to improve with higher expectations about job security and job finding. Home price expectations rose again in January to reach their highest level since May 2014. Median inflation expectations were flat at both the short and medium-term horizons, while inflation uncertainty and inflation disagreement remain elevated compared to pre-COVID-19.
The main findings from the January 2021 Survey are:
- Median inflation expectations at the one-year and three-year horizons remained unchanged at 3.0% in January. Our measures of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) increased slightly at the one-year horizon and decreased slightly at the three-year horizon. Both measures of short and medium-term inflation disagreement remain elevated compared to their pre-COVID-19 levels.
- Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes— at the short-term and the medium-term horizons remained unchanged in January. Both measures are substantially higher than they were before the outbreak of COVID-19.
- Median year-ahead home price change expectations increased 0.4 percentage points to 4.0% in January, the highest reading since May 2014. The increase was driven mostly by respondents who live in the "West" Census region.
- Expectations about changes in the price of commodities increased in January. The median one-year ahead expected change in the cost of gas and in the cost of rent increased the most, by 0.8 and 0.7 percentage points to 6.2% and 6.4%, respectively. The latter is the highest reading in 7 years. The median expected change in food prices, in the cost of medical care, and in the cost of a college education also increased by 0.4, 0.2 and 0.4 percentage points to 5.6%, 9.2% and 5.6%, respectively.*
- Median one-year ahead expected earnings growth remained flat in January at 2.0%. This is the sixth consecutive month that the series has remained unchanged.
- Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—increased from 38.9% in December to 40.2% in January.
- The mean perceived probability of losing one's job in the next 12 months decreased for the third consecutive month from 15.0% in December to 13.6% in January, the lowest reading since September 2019. The decrease was more pronounced among respondents with lower education (no more than a high school degree) and lower household income (less than $50,000). The mean probability of leaving one's job voluntarily in the next 12 months also decreased in January, from 17.1% to 16.0%, a new series low. The decrease was fairly broad based across demographic groups.
- The mean perceived probability of finding a job (if one's current job was lost) increased from 46.2% in December to 49.5% in January, but remains well below its 59.2% reading a year ago.
- The median expected growth in household income increased by 0.2 percentage points to 2.4% in January, the highest level since February of last year.
- Median household spending growth expectations rose by 0.8 percentage points (the second largest month to month increase in the history of the series) to 4.2% (the highest level since June 2015) in January. This sharp increase was driven primarily by respondents below the age of 40.
- Perceptions of credit access compared to a year ago improved somewhat in January with more respondents finding it is easier to obtain credit than one year ago. Expectations about future credit availability improved as well, with more respondents expecting it will be easier to obtain credit in the year ahead.
- The average perceived probability of missing a minimum debt payment over the next three months remained unchanged at 10.5% in January, below its pre-COVID-19 level.
- The median expectation regarding a year-ahead change in taxes (at current income level) increased for the third consecutive month to 4.4% in January from 3.3% in December. This is the highest level since September 2013.
- The mean perceived probability that the average interest rate on saving accounts will be higher 12 months from now increased for the third consecutive month to 27.8% in January from 26.2% in December.
- Perceptions about households' current financial situations compared to a year ago improved slightly in January, with fewer respondents reporting that credit is harder to obtain. Respondents were also slightly more optimistic about their households' financial situations in the year ahead with more respondents expecting their financial situation to improve a year from now.
- The mean perceived probability that U.S. stock prices will be higher 12 months from now increased by 1.1 percentage points to 39.6% in January.
About the Survey of Consumer Expectations (SCE)
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 regarding consumers' outlooks. 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.
* Due to a data recording error in the “one-year ahead commodity price change expectations” series, the data for this series has been revised going back to October 2020.