Inflation Expectations Hit New High, NY Fed Reports
Expectations about inflation over the next 12 months among U.S. consumers hit a new series high of 6.6% in March 2022, up from 6.0% in February, the Federal Reserve Bank of New York reports. However, the median expectation among respondents for average annual inflation across the next three years dipped slightly, from 3.8% to 3.7%.
Expectations about the rise in home prices during the next 12 months were up, from 5.7% to 6.0%. Median expectations about the growth in consumer spending during the year ahead were up even more sharply, from 6.4% to 7.7%, representing a new high and the largest month-to-month increase for the series, which began in June 2013.
These findings are according to the March 2022 Survey of Consumer Expectations (SCE) conducted by the Center for Microeconomic Data at the Federal Reserve Bank of New York, which was released on April 11, 2022. In addition to inflation, the SCE includes respondents’ views on the labor market and household finance. Key findings in all these areas are summarized below.
- In March 2022, U.S. consumers expected 6.6% inflation over the next 12 months, up from 6.0% in February.
- This is a new high for the series that started in June 2013 and its biggest month-to-month jump.
- Expectations about average annual inflation across the next three years fell slightly, from 3.8% to 3.7%.
- Consumers expect to spend 7.7% more over the next 12 months, up from 6.4% in February.
- Expected increases in home prices for the year ahead rose from 5.7% to 6.0%.
As noted above, the median expectation about inflation over the next 12 months rose to 6.6% in March, up from 6.0% in February. This is a new series high. Also, as noted above, the median inflation expectation for the next three years fell from 3.8% to 3.7%.
The increase in short-term expectations was broad-based across age, education, and income groups. However, The decline in medium-term expectations was driven by respondents with no college education and with annual household incomes under $50,000. Disagreement across respondents (as measured by the difference between the 75th and 25th percentiles of inflation expectations) increased at both horizons to new series highs.
The median level of uncertainty expressed by survey respondents about future inflation rose at the one-year horizon to a new series high. At the three-year horizon, uncertainty was unchanged from February, remaining at a series high.
Inflation: Home Prices
The median expectation about the increase in home prices over the year ahead rose from 5.7% in February to 6.0% in March. The measure, which has been elevated for the past year, remains well above its pre-pandemic reading of 3.0% in February 2020.
Inflation: Other Categories
Expectations about year-ahead price changes were basically unchanged for rent (at 10.2%) and medical care (at 9.6%). They increased from 8.8% to 9.6% for gasoline and from 9.2% to 9.6% for food. The median one-year-ahead expected change in the cost of a college education decreased from 9.0% to 8.5%.
The median expected earnings growth for the year ahead was unchanged at 3.0% for the third consecutive month.
The mean, or average, perceived probability among respondents that the U.S. unemployment rate will be higher one year from now rose by 1.7 percentage points to 36.2%. This is the highest level since February 2021, and the increase was broad based across age, education, and income groups.
The mean perceived probability of losing one’s job sometime during the next 12 months rose from 10.8% to 11.1%. The pre-pandemic reading in February 2020 was 13.8%. The mean probability of leaving one’s job voluntarily in the next 12 months increased from 19.0% to 19.2%.
The mean perceived probability of finding a job, should the respondent’s current job be lost, fell from 55.7% to 56.5%. This is well above the reading of 48.7% in March 2021.
The median expectation about the growth in household income over the next 12 months dropped from 3.2% to 3.0%. This is the lowest reading since August 2021.
As noted above, the median expectation about the growth in household spending over the next 12 months surged from 6.4% in February to 7.7% in March. Also as noted above, this represents both a new high and the biggest month-to-month increase since the series began in June 2013. While the jump was broad based, it was most pronounced among respondents with a college degree and with annual household incomes above $100,000.
Continuing a trend, increasing numbers of respondents report that they are finding it harder to obtain credit now than a year ago. Expectations about future credit availability also continue to deteriorate.
In line with another trend, more respondents reported being financially worse off than they were a year ago. Moreover, fewer respondents expect their financial situation to improve a year from now.
The SCE is a nationally representative, internet-based survey of a rotating panel of about 1,300 household heads. Respondents participate for up to 12 months, with a roughly equal number of them rotating in and out of the panel each month. While similar surveys include an entirely different set of respondents each time they are taken, the SCE seeks to capture changes in the expectations and behavior of the same individuals over time.