NEW YORK— The Federal Reserve Bank of New York's Center for Microeconomic Data released the February 2018 Survey of Consumer Expectations, which shows a slight increase in short- and medium- term inflation expectations. Consumers' expectations about their personal financial situations continued to improve. Expectations about changes in taxes declined to a new series’ low, while expectations about growth in government debt increased sharply.
The main findings from the February 2018 Survey are:
Inflation
- Median inflation expectations increased by 0.1 percentage points at both the one-year and three-year horizons in February, to 2.8% and 2.9%, respectively. The increase was driven largely by higher educated respondents (with a college degree or more).
- Median inflation uncertainty—or the uncertainty expressed by respondents regarding future inflation outcomes—declined to series' lows at both horizons.
- Median home price change expectations declined from 3.5% in January to 3.3% in February, remaining slightly higher than its 2017 average of 3.2%. Home price change uncertainty also declined.
- The median one-year ahead expected gasoline price change and food price change remained flat in February. Expectations for a change in the cost of college education declined from 7.8% to 6.0%.
Labor Market
- Median one-year ahead earnings growth expectations remained flat at 2.7% in February.
- Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—decreased from 32.4% in January to 32.3% in February, reaching a new series' low.
- Both the mean perceived probability of losing one's job in the next 12 months and the mean probability of leaving one's job voluntarily in the next 12 months declined, from 14.9% to 12.8%, and from 22.1% to 21.4%, respectively. The declines were broad-based across all demographic groups.
- The mean perceived probability of finding a job (if one's current job was lost) remained unchanged at 59.7% in February, just 0.4 percentage points below the series' high reached in November 2017.
- The mean probability of changing residence over the next 12 months, reversed its drop seen in January. It increased sharply from 15.9% to 18.3%, reaching the level of its trailing 12-month average.
Household Finance
- Consumers' expectations about their financial situations compared to a year ago improved and reached its highest level since the inception of the Survey in June 2013, with 40.2% of respondents feeling they are better off. One-year ahead expectations of households' financial situations also improved with only 10.2% of respondents expecting to be worse off financially, compared to 12.5% in January.
- Median expected household income growth increased from 2.8% in January to 3.0% in February, going back to its series' high reached in November 2017. The increase was primarily driven by younger (less than 40 years old) and lower educated (less than a high-school degree) respondents.
- Median household spending growth expectations improved slightly from 2.9% in January to 3.0% in February, matching its 2017 average.
- The perceived change in credit availability compared to a year ago worsened slightly in February, with the proportion of respondents reporting easier credit access compared to a year ago declining from 27.3% to 25.4%. Expectations for year-ahead credit availability also worsened in February, with the proportion expecting tightening in credit access increasing from 25.5% to 27.6%.
- The median expectation regarding year-ahead change in taxes (at current income level) declined again to 1.1% in February from 1.6% in January, a new series low.
- The average perceived probability of missing a minimum debt payment over the next three months decreased from 12.3 % in January to 11.6% in February. The decline was broad-based across age groups.
- The mean perceived probability that the average interest rate on saving accounts will be higher 12 months from now than it is today rose sharply from 34.9% in January to 36.5% in February.
- The mean perceived probability that U.S. stock prices will be higher 12 months from now than they are today declined from 44.9% in January to 43.0% in February, slightly below its trailing 12-month average of 43.5%.
- Median year-ahead expected growth in government debt increased sharply from 5.9% in January to 7.5% in February, reaching a level well above the 2017 average of 5.6%.
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.
