NEW YORK—The Federal Reserve Bank of New York’s Center for Microeconomic Data today released the October 2021 Survey of Consumer Expectations, which shows that the median inflation expectations remained unchanged at the medium-term horizon and increased at the short-term horizon. Uncertainty and disagreement about future inflation increased at both the short- and medium-term horizons to new series highs. Households’ labor market expectations continued to improve with earnings growth and job finding expectations increasing and perceived job loss risks decreasing. Household finance expectations were mixed: year ahead income and spending growth expectations both increased to new series highs, while households’ financial situation, credit availability, and delinquency expectations all deteriorated.
The main findings from the October 2021 Survey are:
Inflation
- After increasing for three consecutive months, median inflation expectations at the three-year horizon remained unchanged at 4.2% in October. In contrast, median inflation expectations increased by 0.4 percentage point to 5.7% at the one-year horizon, reaching a new series high since the inception of the survey in June 2013. The increase in the short-term measure was the series’ twelfth consecutive increase and was most pronounced for respondents who have at least a college degree and those between ages 40 and 60. Our measures of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) reached new series’ highs at both the short- and medium-term horizons.
- Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—increased at both the short- and medium-term horizons. Both measures reached series highs in October.
- Median year-ahead home price change expectations increased by 0.1 percentage point to 5.6%, above its 12-months trailing average of 4.8%. Median year-ahead home price growth uncertainty—or the uncertainty expressed regarding year-ahead home price growth outcomes—decreased, but remains substantially higher than its pre-pandemic levels.
- Expectations about year-ahead price changes for all the commodities considered in the survey, except for the cost of medical care, increased in October. The median one-year ahead expected change in the price of gas rebounded sharply to 9.4% from 5.9%. The median one-year ahead expected change in the cost of college education and in the price of food increased by 1.5 and 2.1 percentage points to 7.4% and 9.1%, respectively. The median expected change in the cost of rent increased by 0.4 percentage points to 10.1%, a new series high. Finally, the median expected change in the cost of medical care remained unchanged.*
Labor Market
- Median one-year ahead expected earnings growth increased by 0.1 percentage point to 3.0% in October, a series high since its inception in June 2013.
- Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—decreased to 35.5%, from 35.8% in September.
- The mean perceived probability of losing one's job in the next 12 months decreased by 0.1 percentage point to 11.0%. On the other hand, the mean likelihood of leaving one's job voluntarily in the next 12 months increased to 20.0%, from 18.9% in September.
- The mean perceived probability of finding a job in the next three months (if one's current job were lost) increased by 1.4 percentage points to 56.6%. The increase was most pronounced for the respondents between ages 40 and 60 and those with no more than a high school diploma. The series still remains below its pre-pandemic February 2020 level of 58.7%.
Household Finance
- The median expected year-ahead household income growth increased to 3.3% in October from 3.0% in September and reached a new series high. The increase was broad-based across age and income groups.
- Median household spending growth expectations increased by 0.4 percentage point to 5.4%, reaching a new series high. The increase was most pronounced for respondents with no more than a high school degree and for those with annual household incomes less than $50,000.
- Perceptions of credit access compared to a year ago deteriorated, with fewer respondents finding it easier to obtain credit now than a year ago and more respondents finding it harder to obtain credit now than a year ago. Similarly, expectations for future credit availability also deteriorated, with more (fewer) respondents expecting it will be harder (easier) to obtain credit in the year ahead.
- The average perceived probability of missing a minimum debt payment over the next three months increased by 1.3 percentage points to 11.2%, its highest reading since May 2020.
- The median expectation regarding a year-ahead change in taxes (at current income level) increased to 4.7% from 4.3%.
- The mean perceived probability that the average interest rate on saving accounts will be higher 12 months from now declined by 0.3 percentage point to 27.0%.
- Perceptions about households’ current financial situations compared to a year ago deteriorated, with more respondents reporting that they are worse off compared to a year ago. Respondents were also slightly less optimistic about their households’ financial situations in the year ahead.
- The mean perceived probability that U.S. stock prices will be higher 12 months from now increased by 0.1 percentage point to 38.6%, staying below its 12-month trailing average of 39.9%.
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.
