November 15, 2022 – NEW YORK—The Federal Reserve Bank of New York’s Center for Microeconomic Data on Monday released the October 2022 Survey of Consumer Expectations, which shows that inflation expectations increased in the short, medium, and longer terms. Home price growth expectations were unchanged, while the expected change in the price of gas increased sharply. Unemployment expectations reached the highest level since April 2020. Household income growth expectations increased to a new series high, while households’ expectations about credit access one year from now worsened.
The main findings from the October 2022 Survey are:
- Median inflation expectations increased at both the one- and three-year-ahead horizons in October, by 0.5 and 0.2 percentage point, respectively, to 5.9% and 3.1%. Both increases were broad-based across age, education, and income groups. The survey’s measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) decreased at the one-year horizon and increased at the three-year horizon.
- Median five-year-ahead inflation expectations, which have been elicited in the monthly SCE core survey on an ad-hoc basis since the beginning of this year and were first published in July 2022, increased by 0.2 percentage point to 2.4%. Disagreement across respondents in their five-year-ahead inflation expectations increased in October.
- Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—increased at the short-term horizon and declined at the medium-term horizon.
- Median home price growth expectations was unchanged at 2.0%, the lowest reading since July 2020. Home price growth expectations remain below their pre-pandemic levels.
- The median expected change in gas prices rose by 4.3 percentage points to 4.8%—the largest one-month increase on record. Expectations about year-ahead price changes rose by 0.7 percentage point for food (to 7.6%) and 0.1 percentage point for rent (to 9.8%). The median expected change in the cost of medical care was unchanged at 9.2%, while the median expected change in the cost of college education declined by 0.4 percentage point to 8.6%.
- Median one-year-ahead expected earnings growth increased by 0.1 percentage point to 3.0% in October. The series has been moving between a narrow range of 2.8% to 3.0% since September 2021.
- Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—increased to 42.9%, the highest reading since April 2020, from 39.1% in September. The increase was broad-based across demographic groups, but was most pronounced for respondents with no more than a high school education and those with annual household incomes between $50-$100k.
- The mean perceived probability of losing one’s job in the next 12 months increased by 0.4 percentage point to 12.0%. Similarly, the mean probability of leaving one’s job voluntarily in the next 12 months increased by 0.1 percentage point to 19.5%. Both increases were most pronounced for those over the age of 60 and those with no more than a high school education.
- The mean perceived probability of finding a job (if one’s current job was lost) increased by 0.7 percentage point to 58.0%.
- The median expected growth in household income increased to 4.3%, a series high, from 3.5% in September. The increase was most pronounced for those over the age of 60 and those with annual household incomes under $50k. Median household spending growth expectations increased to 7.0% from 6.0%. The increase was broad-based but most pronounced for respondents with no more than a high school education.
- Perceptions of credit access compared to a year ago deteriorated in October, with the share of households reporting it is harder to obtain credit than one year ago increasing to a series high of 56.7%. Similarly, expectations for future credit availability also deteriorated in October, with the share of respondents expecting it will be harder to obtain credit in the year ahead increasing sharply.
- The average perceived probability of missing a minimum debt payment over the next three months declined to 11.6% from 12.2%.
- The median expectation regarding a year-ahead change in taxes (at current income level) declined by 0.1 percentage point to 4.3%.
- Median year-ahead expected growth in government debt continued its declining trend and decreased by 0.1 percentage point to 10.2%, its lowest reading since March 2020.
- The mean perceived probability that the average interest rate on saving accounts will be higher in 12 months increased by 0.8 percentage point to 35.5%. The increase was most pronounced for those with no more than a high school education.
- Perceptions about households’ current financial situations compared to a year ago deteriorated . Year-ahead expectations about households’ financial situations also worsened in October.
- The mean perceived probability that U.S. stock prices will be higher 12 months from now decreased by 1.4 percentage points to 33.9%.
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, 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.
Source: Federal Reserve Bank of New York