NEW YORK—The Federal Reserve Bank of New York’s Center for Microeconomic Data today released the December 2023 Survey of Consumer Expectations, which shows that inflation expectations declined at the short-, medium- and longer-term horizons. Notably, inflation expectations at the short-term horizon reached the lowest level recorded since January 2021. Earnings growth and spending growth expectations also decreased slightly to their lowest recorded levels since 2021, while expectations about credit access and households’ financial situation turned less pessimistic.
The main findings from the December 2023 Survey are:
Inflation
- Median inflation expectations declined at all horizons, falling to 3.0% from 3.4% at the one-year ahead horizon, to 2.6% from 3.0% at the three-year ahead horizon, and to 2.5% from 2.7% at the five-year ahead horizon. Median inflation expectations at the one-year ahead horizon reached the lowest level recorded since January 2021. The survey’s measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) increased at the one-year ahead horizon, and decreased at the three-year and five-year ahead horizons.
- Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—remained essentially unchanged at all three horizons.
- Median home price growth expectations remained unchanged at 3.0%, remaining well above the series 12-month trailing average of 2.4%.
- Median year-ahead expected price changes increased by 0.5 percentage point for the cost of a college education to 6.3%, decreased by 0.3 percentage point for food to 5.0%, decreased by 0.7 percentage point for rent to 7.3%, and remained flat for gas at 4.5% and the cost of medical care at 9.1%.
Labor Market
- Median one-year-ahead expected earnings growth decreased by 0.2 percentage point to 2.5%, the lowest level since April 2021. The decline was driven by respondents with at most a high school diploma.
- Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—decreased by 1.4 percentage points to 37.0% , remaining below the series 12-month trailing average of 39.5%.
- The mean perceived probability of losing one’s job in the next 12 months decreased slightly by 0.2 percentage points to 13.4%, remaining above the series 12-month trailing average of 12.3%. The mean probability of leaving one’s job voluntarily in the next 12 months increased by 0.8 percentage point to 20.4%.
- The mean perceived probability of finding a job (if one’s current job was lost) increased marginally to 55.9% from 55.2% in November.
Household Finance
- Median expected growth in household income decreased by 0.1 percentage point to 3.0%, remaining above the February 2020 pre-pandemic level of 2.7% . The series has been moving within a narrow range of 2.9% to 3.3% since January 2023.
- Median household spending growth expectations declined by 0.2 percentage point to 5.0%, reaching the lowest level recorded since September 2021. Still, the series remains well above its February 2020 pre-pandemic level of 3.1%.
- Perceptions of credit access compared to a year ago were largely unchanged. Expectations about credit access a year from now instead improved with a larger share of respondents expecting looser credit conditions and a smaller share of respondents expecting tighter credit conditions a year from now.
- The average perceived probability of missing a minimum debt payment over the next three months increased by 0.6 percentage point to 12.4% , a level above the series 12-month trailing average of 11.5% but comparable to those prevailing just before the pandemic.
- The median expected year-ahead change in taxes at current income level remained unchanged at 4.1%.
- Median year-ahead expected growth in government debt decreased to 9.4% from 10% in November.
- The mean perceived probability that the average interest rate on saving accounts will be higher in 12 months decreased by 3.6 percentage points to 25.9%, its lowest level since November 2021.
- Perceptions about households’ current financial situations improved with fewer respondents reporting being worse off than a year ago. Year-ahead expectations also improved with a smaller share of respondents expecting to be worse off and a larger share of respondents expecting to be better off a year from now.
- The mean perceived probability that U.S. stock prices will be higher 12 months from now increased by 0.2 percentage point to 36.7%.
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, this panel allows us to observe the changes in expectations and behavior of the same individuals over time. For further information on the SCE, please refer to an overview of the survey methodology here, the interactive chart guide, and the survey questionnaire.
