NEW YORK—The Federal Reserve Bank of New York's Center for Microeconomic Data released the September 2020 Survey of Consumer Expectations, which shows improvements in labor market and spending expectations, as well as less pessimistic views about households' expected financial situation. Home price growth expectations returned to their pre-COVID-19 levels, and debt delinquency expectations remained low. In contrast, year-ahead household income expectations remain weak compared to the pre-COVID-19 period. Median inflation expectations remained unchanged at the short-term horizon, while it declined at the medium-term horizon. Uncertainty and disagreement about future inflation remain elevated.
The main findings from the September 2020 Survey are:
Inflation
- Median inflation expectations in September remained unchanged at 3.0% at the one-year horizon and decreased 0.3 percentage point returning to its July level of 2.7% at the three-year horizon. The decline was driven by respondents above the age of 40 and those with at least some college education. Our measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) remains substantially above its pre-COVID-19 levels at both horizons.
- Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—increased for the third consecutive month at the three-year horizon, while it retreated to its July 2020 level at the one-year horizon. Both series remain elevated relative to their pre-COVID-19 readings.
- Median home price change expectations continued on its upward trend after reaching a series' low of 0% in April 2020, and increasing from 2.8% in August to 3.1% in September, just above its 2019 average of 3.0%. The increase was broad-based across demographic groups and was strongest for respondents who live in the South Census region.
- The median one-year ahead expected change in the cost of a college education remained essentially unchanged, while median expectations for the price of gasoline and for food prices both declined by 0.8 and 0.3 percentage points to 4.8% and 5.1%, respectively. Median expectations for the cost of rent and medical care also decreased from 5.5% and 8.3% to 5.4% and 6.8% in September, respectively.*
Labor Market
- Median one-year ahead expected earnings growth remained unchanged at 2.0% in September, for the second consecutive month. The series is below its 2019 average level of 2.4%.
- Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—decreased from 39.1% in August, to 36.4% in September, below its 2019 average of 36.9%. The decline was driven by respondents below the age of 60.
- The mean perceived probability of losing one's job in the next 12 months retreated from 18.0% in August to 16.6% in September, remaining well above its pre-COVID-19 reading of 13.8% in February. This month's decline was more pronounced among respondents above age 60 and those with a household income below $50,000. The mean probability of leaving one's job voluntarily in the next 12 months increased 0.6 percentage point to 20.3% in September. The increase was broad-based across demographic groups.
- The mean perceived probability of finding a job (if one's current job was lost) declined from 50.7% in August to 49.9% in September. The series remains well below its 2019 average of 59.9%.
Household Finance
- Median expected household income growth increased by 0.1 percentage point to 2.3% in September, remaining well below its 2019 average of 2.8%. The increase was driven mostly by respondents below the age of 40 and those with at least some college education.
- Median household spending growth expectations increased from 3.0% in August to 3.4% in September, its highest reading since May 2019.
- Perceptions of credit access compared to a year ago and expectations for year-ahead credit availability both improved somewhat in September, with fewer respondents reporting or expecting difficulties in obtaining credit.
- The average perceived probability of missing a minimum debt payment over the next three months increased from 9.7% in August to 10.7% in September. This reading remains below its 2019 average of 11.5%.
- The median expectation regarding a year-ahead change in taxes (at current income level) rebounded from 2.7% in August to 3.0% in September.
- The mean perceived probability that the average interest rate on saving accounts will be higher 12 months from now slightly declined to 27.6% in September, from 28.0% in August.
- Perceptions about households' current financial situations compared to a year ago deteriorated slightly, with slightly more respondents reporting being worse off. In contrast, one-year ahead expectations about households' financial situations improved with more respondents expecting their financial situation to improve and fewer respondents expecting their financial situation to worsen.
- The mean perceived probability that U.S. stock prices will be higher 12 months from now decreased 0.8 percentage points to 44.1% in September.
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.
