Consumers expect a rise in short-term inflation but a decline in medium-term inflation, according to the Federal Reserve Bank of New York’s September survey of consumer expectations.
The survey released Tuesday contains information about how consumers expect overall inflation and prices for food, gas, housing, and education to behave. It also looks at consumers’ views on job prospects and earnings growth.
The N.Y. Fed said that median inflation expectations increased by 0.1 percentage point at the one-year horizon to 2.5%, while median three-year ahead inflation expectations declined by 0.1 percentage point to 2.4% in September.
“This is the lowest reading for the three-year ahead inflation expectations since the start of the series in June 2013,” the N.Y. Fed said. “The decline in the medium-term inflation expectations was driven by the respondents with household incomes less than $50,000 and those with a high school degree or less.”
Expectations about household income and spending growth remained stable, the N.Y. Fed said, while expectations about year-ahead credit availability improved. But home price growth expectations fell to a new low.
Median home price change expectations declined from 2.9% in August to 2.8% in September, a new low, after remaining at 3.0% from December 2018 to July 2019.
The median one-year ahead expected change in gasoline prices increased to 4.4% in September from 4.1% in August. In contrast, the N.Y. Fed said that median one-year ahead expected cost of college education, medical care, and rent changed little in September, staying within 0.1 percentage point of the previous month’s expectations.
The N.Y. Fed said that the median one-year ahead earnings growth expectations increased to 2.5% in September from 2.3% in August, exceeding its trailing 12-month average of 2.4%. The increase was driven by respondents below age 60 and those with at least some college education.
Mean unemployment expectations remained nearly unchanged at 38.4%; it is 2.2 percentage points below the five-year high reached in January.
The mean perceived probability of losing one’s job in the next 12 months fell to 13.4%, from 14.2% in August, moving below the trailing 12-month average of 14.3%. The mean probability of leaving one’s job voluntarily in the next 12 months was flat at 20.1%. The mean perceived probability of finding a job increased to 60.3%, from 60.0% in August, the New York Fed said.
Empire State business activity rises
Business activity grew slightly in New York State, according to firms responding to the N.Y. Fed’s October Empire State Manufacturing Survey.
The headline general business conditions index edged up two points to 4.0.
“There was only a small increase in new orders, but shipments picked up. Delivery times decreased slightly, while inventories were little changed. Employment levels and hours worked both increased modestly,” the N.Y. Fed said. “Input prices and selling prices increased at a slower pace than last month. Indexes assessing the six-month outlook indicated that optimism about future conditions improved somewhat but remained subdued.”
