NEW YORK—The Federal Reserve Bank of New York’s Center for Microeconomic Data released the December 2019 Survey of Consumer Expectations, which shows a modest increase in short-term inflation expectations. Expectations for three-year ahead inflation, home price changes, earnings growth, unemployment, and income growth remained unchanged in December. Consumers were also slightly more pessimistic about other labor market outcomes such as the perceived probability of losing one’s job or the perceived probability of finding a new job.
The main findings from the December 2019 Survey are:
Inflation
- Median inflation expectations increased by 0.1 percentage point at the one-year horizon to 2.5%, and remained unchanged at the three-year horizon at 2.5%.
- Similarly, median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—increased slightly at the one-year horizon and remained unchanged at the three-year horizon.
- Median home price change expectations were unchanged at 3.0%, similar to levels observed throughout most of 2019.
- The median one-year ahead expected price change in gas decreased for the third consecutive month to 3.4%, its lowest level since July 2017. In contrast, the median one-year ahead expected price change for a college education and for rent increased in December, while the measure for price change in medical care and food remained flat.
Labor Market
- Median one-year ahead expected earnings growth remained unchanged at 2.2% in December, below the 12-month trailing average of 2.4%.
- Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—also remained unchanged at 34.6% in December.
- The mean perceived probability of losing one’s job in the next 12 months increased 1.0 percentage point to 15.4% in December. The increase was driven by respondents over the age of 40 and those without a college degree. In contrast, the mean probability of leaving one’s job voluntarily in the next 12 months decreased for the second consecutive month from 21.2% in November to 20.9% in December. The decrease was most pronounced among lower income respondents (below $50,000) and respondents with a high school degree or less.
- The mean perceived probability of finding a job (if one’s current job was lost) decreased slightly from 59.3% in November to 58.8% in December, below the 12-month trailing average of 59.9%.
Household Finance
- Median expected household income growth was unchanged at 2.9% in December, just above its trailing 12-month average of 2.8%.
- After a sharp decline last month, median household spending growth expectations rebounded slightly in December, increasing 0.1 percentage point to 2.9%. The reading, however, remains well below its trailing 12-month average of 3.2%.
- Credit access perceptions and expectations became more concentrated in December, with fewer respondents reporting much looser and much tighter credit access conditions.
- The average perceived probability of missing a minimum debt payment over the next three months increased from 11.3% to 12.5%, above its 12-month average of 11.5%.
- The mean perceived probability that the average interest rate on saving accounts will be higher 12 months from now increased 0.3 percentage points to 27.4% in December. The new reading remains well below its level of 37.9% a year ago.
- One-year ahead expectations as well as perceptions about households’ financial situations were largely stable in December, with slightly higher shares of respondents reporting no change in their financial situation compared to a year ago and expecting no change in their financial situation a year from now.
- The mean perceived probability that U.S. stock prices will be higher 12 months from now increased to 40.4% in December from 39.7%, just above its 12-month trailing average of 40.2%.
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.
