NEW YORK—The Federal Reserve Bank of New York's Center for Microeconomic Data released the March 2021 Survey of Consumer Expectations, which shows a continuation in the recent upward trend in inflation, home price and spending growth expectations. In particular, expectations about home, gas, and rent price changes all reached new series highs in March. Labor market expectations continued to recover with higher expectations about job security and improved unemployment expectations. Finally, households were more positive about their current and expected financial situation and their ability to access credit.
The main findings from the March 2021 Survey are:
Inflation
- Median inflation expectations at the one-year and three-year horizons both increased 0.1 percentage point in March to 3.2% and 3.1%, respectively. Inflation expectations at both horizons have increased steadily over the past five months and they are now at their highest since mid-2014. Our measures of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) decreased slightly at the one-year horizon and remained unchanged at the three-year horizon. Both measures of short and medium-term inflation disagreement remain elevated compared to their pre-COVID-19 levels.
- Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—increased at the medium-term horizon and remained unchanged at the short-term horizon. Both measures remain well above the levels observed before the outbreak of COVID-19.
- Median year-ahead home price change expectations increased 0.8 percentage point to 4.8% in March, a new series high. The increase was driven mostly by respondents who live in the "West" and "Midwest" Census regions.
- The median one-year ahead expected change in the price of gas and in the price of rent increased by 0.3 and 0.2 percentage point in March to new series highs at 9.9% and 9.3%, respectively. The median expected change in food prices remained unchanged in March, while the median expected change in the cost of medical care and in the cost of a college education decreased by 0.1 and 0.2 percentage point to 9.3% and 5.6%, respectively.*
Labor Market
- Median one-year ahead expected earnings growth decreased 0.2 percentage point in March returning to 2.0%, the level at which it remained between July 2020 and January 2021.
- 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 February to 34.4% in March, the lowest level since the start of the pandemic.
- The mean perceived probability of losing one's job in the next 12 months decreased from 14.2% in February to 12.8% in March, the lowest reading in almost three years. The decrease was more pronounced among respondents with lower household income (less than $50,000). The mean probability of leaving one's job voluntarily in the next 12 months also decreased in March, from 17.7% to 16.7%. The decrease was more pronounced among respondents with lower education (no more than a high school degree) and those with lower household income (less than $50,000).
- The mean perceived probability of finding a job (if one's current job was lost) decreased slightly from 48.8% in February to 48.7% in March and remains roughly 10 percentage points below its pre-pandemic readings.
Household Finance
- The median expected growth in household income increased by 0.4 percentage point to 2.8% in March, the highest level since January of last year.
- Median household spending growth expectations rose for the third consecutive month from 4.6% in February to 4.7% in March. This is the highest reading for the series since December 2014.
- Perceptions of credit access compared to a year ago improved in March with fewer respondents finding it harder to obtain credit now than a year ago. Expectations about future credit availability improved as well, with fewer respondents expecting it will be harder to obtain credit in the year ahead.
- The average perceived probability of missing a minimum debt payment over the next three months declined 0.5 percentage point to 9.6% in March, below its pre-COVID-19 level.
- After increasing for four consecutive months, the median expectation regarding a year-ahead change in taxes (at current income level) decreased by 0.4 percentage point to 4.2% in March. Nevertheless, the reading remains substantially higher than its 2020 average of 3.0%.
- The mean perceived probability that the average interest rate on saving accounts will be higher 12 months from now increased for the fifth consecutive month to 29.4% in March from 27.9% in February.
- Perceptions about households' current financial situations compared to a year ago improved slightly in March with fewer respondents reporting being worse off than they were a year ago. Respondents were also more optimistic about their households' financial situations in the year ahead with more respondents expecting their financial situation to improve a year from now.
- The mean perceived probability that U.S. stock prices will be higher 12 months from now increased by 1.3 percentage points to 41.2% in March.
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.
