NEW YORK—The Federal Reserve Bank of New York’s Center for Microeconomic Data today released the September 2021 Survey of Consumer Expectations, which shows that short- and medium-term inflation expectations rose to their highest levels since the inception of the survey in 2013. In contrast, year-ahead home price and commodity price expectations all subsided in September. Labor market expectations improved slightly, while household finance expectations (e.g., income or spending growth) remained mostly unchanged.
The main findings from the September 2021 Survey are:
Inflation
- Median short-term (one-year-ahead) inflation expectations increased by 0.1 percentage point in September to 5.3%, the eleventh consecutive monthly increase and a new series high since the inception of the survey in 2013. Median medium-term (three-year-ahead) inflation expectations also increased, to 4.2% from 4.0%, representing the third consecutive monthly increase and a new series high. However, as reported in a recent blog post, longer-term (5-year ahead) inflation expectations still appear to be as well anchored as they were two years ago, before the start of the pandemic. Our measure of disagreement across respondents (the difference between the 75th and 25th percentiles of inflation expectations) was unchanged at the one-year horizon and decreased 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—was unchanged at the short-term horizon and decreased at the medium-term horizon. Both measures are still well above the levels observed before the outbreak of COVID-19.
- Median year-ahead home price change expectations decreased by 0.4 percentage point in September to 5.5%, the fourth consecutive monthly decrease. The decrease was driven mostly by respondents who live in the “West” and “Northeast” Census regions.
- Expectations about year-ahead price changes decreased for all the commodities considered in the survey. The median one-year-ahead expected change in the price of gas decreased sharply from 9.2% to 5.9%. The median one-year-ahead expected change in the cost of a college education and in the price of food decreased by 1.1 and 0.9 percentage points, to 5.9% and 7.0%, respectively. Finally, the median one-year-ahead expected change in the cost of medical care and in the cost of rent each fell 0.3 percentage point to 9.4% and 9.7%, respectively.*
Labor Market
- Median one-year-ahead expected earnings growth rebounded in September, increasing 0.4 percentage point to 2.9%, substantially above its 12-month trailing average of 2.2%. The decrease was driven mostly by respondents over the age of 40 and respondents without a bachelor’s degree.
- Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—increased 0.8 percentage point to 35.8%, slightly above its 12-month trailing average of 35.7%.
- The mean perceived probability of losing one’s job in the next 12 months decreased from 12.5% to 11.1%. The decrease was more pronounced among respondents below the age of 40 and those with less than $50,000 in household income. The mean probability of leaving one’s job voluntarily in the next 12 months also decreased, from 20.0% to 18.9%. The decrease was more pronounced among respondents above the age of 60, those with no more than a high school diploma, and those with more than $100,000 in household income.
- The mean perceived probability of finding a job (if one’s current job was lost) rose to 55.2% from 54.9% in August. Despite the increase, the September reading remains below its pre-pandemic levels.
Household Finance
- The median expected growth in household income remained unchanged at its series high of 3.0% in September.
- The median household spending growth expectations was unchanged at 5.0%, remaining above its 12-month trailing average of 4.3%.
- Perceptions of credit access compared to a year ago were mixed, with fewer respondents finding it easier to obtain credit now than a year ago, but also fewer respondents finding it harder to obtain credit now than a year ago. Similarly, expectations about future credit availability were mixed, with fewer respondents expecting it will be easier or harder to obtain credit in the year ahead.
- The average perceived probability of missing a minimum debt payment over the next three months increased by 0.3 percentage point to 9.9%, but remains just below its 12-month trailing average of 10.1%.
- The median expectation regarding a year-ahead change in taxes (at current income level) decreased by 0.3 percentage point to 4.3%.
- Median year-ahead expected growth in government debt decreased to 14.4%, from 15.1% in August.
- The mean perceived probability that the average interest rate on saving accounts will be higher 12 months from now decreased to 27.3%, from 27.4% in August.
- Perceptions about households’ current financial situations compared to a year ago deteriorated slightly, with more respondents reporting being financially worse off than they were a year ago. In contrast, respondents were 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 decreased by 0.5 percentage points to 38.5%.
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.
