Press Release

Inflation Expectations Stable while Home Price Growth Expectations Continue to Deteriorate

January 14, 2019

NEW YORK— The Federal Reserve Bank of New York’s Center for Microeconomic Data released the December 2018 Survey of Consumer Expectations, which shows no change in short-term inflation expectations and a slight uptick in medium-term inflation expectations. Expectations that the unemployment rate will be higher increased for the third consecutive month, while expectations about income and spending growth remained stable. Home price growth expectations continued their downward trend. Gas price growth expectations retreated for the second month in a row, and expectations about stock prices worsened.

The main findings from the December 2018 Survey are:


  • Median inflation expectations at the one-year horizon remained unchanged at 3.0%, while they increased by 0.1 percentage points at the three-year horizon to 3.0% in December, returning to October reading. Inflation uncertainty–or the uncertainty expressed by respondents regarding future inflation outcomes–also remained unchanged.
  • Median home price change expectations declined again in December to 3.0%, its sixth consecutive decline since June.
  • The median one-year ahead expected gasoline price change saw its second consecutive large drop, declining from 4.5% in October to 3.7% in December, its lowest level since July 2017. In contrast, the median one-year ahead expected price change for food, medical care, and rent changed little in December, staying within 0.1 percentage points relative to the previous month’s expectations. The reading for the median one-year ahead expected food price change is the lowest since the start of the series.
  • The median one-year head expected price change for college education decreased from 6.3% in November to 5.9% in December, remaining well below its 12-month trailing average of 6.8%.

Labor Market

  • Median one-year ahead earnings growth expectations rebounded from 2.0% in November to 2.5% in December, back to its October reading. The increase was most pronounced among respondents without a college degree.
  • Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—increased for the third consecutive month from 35.8% in November to 38.8% in December, reaching the series’ high since October 2016. The increase was broad-based across age, education, and income groups.
  • The mean perceived probability of losing one’s job in the next 12 months fell from 14.7% in November to 13.8%. The mean probability of leaving one’s job voluntarily in the next 12 months also decreased from 22.8% in November to 21.1%.
  • The mean perceived probability of finding a job (if one’s current job was lost) increased from 58.6% in November to 58.8%, remaining within its narrow 57.1-60.0 range for the past year.

Household Finance

  • Median expected household income expectations declined to 2.9%; while the median household spending growth expectations remained unchanged at 3.5% in December.
  • Perceptions of credit access compared to a year ago improved slightly, with the proportion of respondents reporting easier credit access increasing from 26.0% to 28.0%. Expectations for year-ahead credit availability, on the other hand, deteriorated in December. The proportion of respondents expecting improving conditions in credit access decreased from 22.5% to 21.7% and the proportion expecting worsening conditions in credit access increased from 31.3% in November to 34.9%.
  • The average perceived probability of missing a minimum debt payment over the next three months remained steady at 12.0%, close to its 12-month trailing average of 12.1%.
  • The mean perceived probability that the average interest rate on saving accounts will be higher 12 months from now than it is today increased from 37.3% in November to 37.9% in December, remaining well above its year ago level of 34.5%. The increase was most pronounced for lower-educated (high school or less) respondents.
  • One-year ahead expectations as well as perceptions about households’ current financial situations deteriorated somewhat in December, with slightly higher proportions of respondents expecting to be worse off financially.
  • The mean perceived probability that U.S. stock prices will be higher 12 months from now than they are today decreased to 39.6% in December, reaching its lowest level since October 2016.
  • Median year-ahead expected growth in government debt decreased from 7.8% in November to 6.2% in December.

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.

Betsy Bourassa
(212) 720-6885
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