NEW YORK—The Federal Reserve Bank of New York's Center for Microeconomic Data released the February 2021 Survey of Consumer Expectations, which shows sharp increases in year-ahead gas and rent price growth expectations, with both reaching new series highs. Median inflation expectations increased by 0.1 percentage point at the short-term horizon and were unchanged at the medium-term horizon. Median year-ahead expected earnings growth increased to 2.2%, driven by respondents with more than a high school education. Households' year-ahead spending growth expectations rose to 4.6%, the highest level in more than six years.
The main findings from the February 2021 Survey are:
Inflation
- Median year-ahead inflation expectations increased to 3.1% in February from 3.0% in January, while expectations at the three-year horizon were unchanged at 3.0%. The one-year-ahead measure is now at its highest level since July 2014. Our measure of disagreement across respondents—the difference between the 75th and 25th percentile of inflation expectations—declined slightly at the one-year horizon and was unchanged at the three-year horizon, with both measures remaining elevated relative to pre-pandemic levels.
- Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—increased slightly at the one-year horizon and declined at the three-year horizon.
- Median home price change expectations, which have been trending upward, were unchanged at 4.0% in February after reaching their highest level since May 2014 in January.
- The median one-year ahead expected change in gas prices increased for a fifth straight month, jumping to a new series high of 9.6% in February, from 6.2% in January. Similarly, median expectations regarding changes in the cost of rent increased to 9.0% in February from 6.4% in January, marking a third consecutive increase and a new series high. Expectations about price changes in other commodities also increased. Median one-year ahead expectations for food prices and the cost of medical care increased by 0.1 and 0.2 percentage point, respectively, while expectations for the cost of a college education rose by 0.3 percentage point.*
Labor Market
- After remaining flat at 2% for the past seven months, median one-year-ahead expected earnings growth increased to 2.2% in February, driven by respondents with more than a high school education. The overall median remains well below its year-ago level of 2.6%.
- Mean unemployment expectations—or the average probability that the U.S. unemployment rate will be higher one year from now—decreased from 40.2% in January to 39.1% in February, falling slightly below its trailing 12-month average of 39.7%.
- The mean perceived probability of losing one's job in the next 12 months increased slightly from 13.6% in January to 14.2% in February, but remains below its 2020 average of 16.5%. The mean probability of leaving one's job voluntarily in the next 12 months rose from 16.0% in January to 17.7% in February, also remaining below its 2020 average of 19.1%.
- The mean perceived probability of finding a job (if one's current job was lost) decreased from 49.5% in January to 48.8% in February. While above its recent low of 46.2% from December, it remains well below the February 2020 level of 58.7%. This month's decline was driven by respondents with at most a high school education.
Household Finance
- Median expected household income growth was unchanged in February, at 2.4%, remaining well above the series low of 1.9% reached in April 2020, but below the year-ago level of 2.7%.
- Median household spending growth expectations increased to 4.6% in February, after rising to 4.2% in January from 3.4% in December. The current reading is the highest since December 2014. The increase was broad-based across age and income groups.
- Perceptions of credit access compared to a year ago and expectations for year-ahead credit availability both were largely unchanged in February.
- The average perceived probability of missing a minimum debt payment over the next three months decreased from 10.5% in January to 10.1% in February, remaining below its 2020 average of 11.4%.
- The median expectation regarding a year-ahead change in taxes (at current income level) rose to 4.6% in February from 4.4% in January, marking the fourth consecutive monthly increase and the highest reading since June 2013.
- The mean perceived probability that the average interest rate on saving accounts will be higher 12 months from now rose from 27.8% in January to 27.9% in February, the fourth consecutive increase since reaching a series low of 24.3% in October 2020.
- While perceptions about households' current financial situations compared to a year ago deteriorated slightly, one-year-ahead expectations about households' financial situations improved slightly, with more respondents expecting their financial situation to get better over the next year.
- The mean perceived probability that U.S. stock prices will be higher 12 months from now rose to 39.9% in February from 39.6% in January.
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.
