NEW YORK—Results from the September 2016 Survey of Consumer Expectations painted a mixed picture of future expected economic conditions. Inflation expectations declined at both the short-term and the medium-term horizons. Earnings growth expectations declined and job loss expectations worsened, but job finding expectations improved. On the household finance front, income growth expectations retreated somewhat but spending growth expectations rose and credit availability perceptions and expectations improved.

The main findings from the September 2016 Survey are:

Inflation

• Median inflation expectations decreased slightly at the three-year horizon (from 2.7% in August to 2.6% in September), and decreased more markedly at the one-year horizon (from 2.8% in August to 2.5% in September). Both measures are close to their 2016 averages. The decline in the short-term measure was broad-based, whereas the movement in the medium-term measure was driven mostly by college educated, higher-income and low numeracy respondents.
• Median inflation uncertainty (that is, the uncertainty expressed by respondents regarding future inflation outcomes) declined slightly at the one-year horizon, and remained flat at the three-year horizon.
• Median home price change expectations decreased from 3.3% in August to 3.1%, remaining within the narrow 3.0% to 3.3% band observed over the last 12 months, and staying well below the readings in the previous two years. The decline was most noticeable among respondents in the Northeast.
• The median one-year ahead expected gasoline price change edged up slightly from 4.6% in August to 4.8% in September, but has been on a largely declining trend since March. Expectations for changes in the cost of a college education decreased from 7.3% to 6.6%, moving towards the low end of the 5.8% to 8.2% range that has prevailed since the summer of 2015.

Labor Market

• Median one-year ahead expected earnings growth declined from 2.4% in August to 2.0% in September, returning to the low values observed around the turn of the year. The decline was most pronounced among respondents 40 years and older, those with lower education and lower incomes, and those in the South and the Northeast.
• The mean probability that the U.S. unemployment rate will be higher one year from now remained essentially flat in September, but otherwise has been on a gradually increasing trend since a series low recorded in December 2014.
• The mean perceived probability of losing one’s job in the next 12 months rose from 15.2% in August to 16.3% in September, back to levels last observed in September 2014. This measure has been on an upward trend since June. The increase was broad-based across all age and income groups, but most pronounced for lower-educated workers.
• On the other hand, the mean perceived probability of finding a job (if one’s current job were lost) rose from 53.5% in August to 55.0% in September. This reading was higher than the 2016 average and close to the 2015 average for this measure. Job finding expectations improved the most for respondents over 40, and those with less than a college education and with household incomes above $50,000.

Household Finance

• Median expected household income growth declined from 2.9% in August to 2.6% in September, retreating somewhat from its high summer readings. The decline was stronger for younger, lower-educated and lower-income respondents.
• On the other hand, median household spending growth expectations rebounded in September, rising to 3.7% from 3.3% in August. Spending growth expectations have been on an essentially flat trend since March.
• Both the perceived change in credit availability compared to a year ago and one-year ahead credit availability expectations improved in September, with a larger fraction of respondents reporting easier credit conditions.
• However, the average perceived probability of missing a minimum debt payment over the next three months continued its recent upward trend, increasing from 13.9% in August to 14.5% in September. The increase was driven by younger and lower-educated respondents.

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.

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