U.S. consumers’ inflation expectations remained broadly stable in August, but concerns about unemployment and household finances increased, according to the New York Federal Reserve. The survey comes days before the release of August inflation data that could influence the Federal Reserve’s September interest-rate decision.
U.S. consumers largely held their expectations for future inflation steady in August, while becoming more concerned about unemployment, household finances and access to credit, according to a New York Federal Reserve survey released Tuesday.
The NY Fed’s Survey of Consumer Expectations showed that median expectations for inflation one year ahead remained at 3.6%, unchanged from July. Five-year inflation expectations also held at 3.0%, while the three-year outlook edged down to 3.2% from 3.3% in July.
The stability in overall inflation expectations came despite consumers anticipating faster increases in several major household expenses. Expected gasoline price growth over the next year rose to 4.6% from 2.9% in July, while expected food price growth increased to 5.3% from 5.0%. Expectations for medical care costs rose to 9.1%, while rent price growth expectations increased to 6.6%.
The survey also showed a marked deterioration in consumers’ expectations for the labor market. The mean probability that the U.S. unemployment rate would be higher one year from now increased by 1.6 percentage points to 44.4%, its highest level since April 2020, when the economy was experiencing the severe employment shock caused by the COVID-19 pandemic. The increase was broad based across age, education and income groups.
At the same time, consumers were somewhat less worried about personally losing their jobs. The perceived probability of losing a job over the next 12 months declined to 13.8% from 14.2% in July. However, the perceived probability of finding a new job after an involuntary job loss fell to 45.4% from 46.2%.
Households also reported a less favorable financial outlook. Expectations for household spending growth increased to 5.2%, while perceptions of current and future financial conditions deteriorated. More respondents said credit was harder to obtain compared with a year earlier, and expectations for credit availability over the next year also weakened.
The latest survey comes as investors and Federal Reserve officials await another important inflation reading. The U.S. Bureau of Labor Statistics is scheduled to release the August Consumer Price Index on Friday, September 11, at 8:30 a.m. Eastern time. July data showed consumer prices were up 3.4% over the year, keeping inflation above the Federal Reserve’s 2% target.
The August CPI report will arrive just days before the Federal Reserve’s September 15-16 policy meeting. The central bank will be assessing whether inflation is continuing to ease while also monitoring signs of weakness in the labor market.
Recent employment data has provided a mixed picture. The U.S. economy added 162,000 jobs in August, according to the Labor Department, while the unemployment rate remained at 4.1%. Wage growth also slowed slightly to 3.1% on an annual basis.
For the Fed, the combination of relatively stable inflation expectations and increasing concerns about future unemployment underscores the difficult policy environment ahead. Policymakers must weigh persistent price pressures against signs that households are becoming less confident about the labor market and their financial prospects.
Comments (0)
You must be logged in to post comments.
No comments yet. Be the first to start the conversation!