If Powell was on the fence about whether to hike rates in two weeks after the June "hawkish skip" or whatever the said pause is now called, the latest monthly data just released by the NY Fed Consumer Survey should help allay his fears.
According to the NY Fed, near-term inflation expectations - those for the one-year horizon and which traditionally just follow the latest move in the price of gasoline - dropped again to 3.83% in June from May's 4.07%, the third straight decline - one which was broad-based across all demographic groups - and the lowest reading since April 2021. The measure has now fallen by 3 percentage points from its series high in June 2022. This drop, however, was offset by a virtually flat inflation expectation in the three-year-ahead horizon (which dipped to 2.95% from 2.98%) and a surprise increase in the five year inflation expectations, which rose to 2.95% from 2.72% in May, the highest print since March 2022.
At the same time, median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—declined across all three horizons.
Some other observations:
Median home price growth expectations increased for the fifth consecutive month from 2.6% in May to 2.9% in June, the highest reading since July 2022. The increase was driven by respondents with a college degree and those who live in the South and West Census regions, which is surprising because those educated folks should realize what "higher for longer" rates mean for home prices. Unless, of course, we don't have higher for longer and ordinary Americans once again prove to be smarter than the Fed.
Median year-ahead expected price changes declined by 0.4 percentage point for gas (to 4.7%) and 0.1 percentage point for food (to 5.3%). In contrast, median year-ahead expected price changes increased by 1.2 percentage points for the cost of college education (to 8.3%), 0.1 percentage point for medical care (to 9.3%), and 0.3 percentage point for rent (to 9.4%).
Labor Market
- Median one-year-ahead expected earnings growth increased by 0.2 percentage point to 3.0%. The series has been moving within 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—decreased by 2.3 percentage points to 37.7%, the lowest reading since April 2022.
- The mean perceived probability of losing one’s job in the next 12 months increased by 2.0 percentage points to 12.9%, the highest reading since November 2021. The mean probability of leaving one’s job voluntarily in the next 12 months decreased, by 0.2 percentage point, to 18.9%. The increase in the mean likelihood of a layoff was driven by respondents aged 40 or higher.
- The mean perceived probability of finding a job (if one’s current job was lost) decreased from 56.4% in May to 55.3% in June.
And here are the survey respondents' expectations on topics of household finance
- Median expected growth in household income decreased by 0.1 percentage point to 3.2%, remaining below the series 12-month trailing average of 3.6%.
- Median household spending growth expectations declined from 5.6% in May to 5.2% in June, well below its 12-month trailing average of 6.4%, and the lowest reading since September 2021.
- Perceptions of credit access compared to a year ago improved somewhat in June, with a slightly higher share of households reporting that it is easier to obtain credit now than a year ago. Similarly, respondents’ views about future credit availability improved slightly. The share of respondents expecting tighter credit conditions a year from now decreased, while the share expecting looser credit conditions rose.
- The average perceived probability of missing a minimum debt payment over the next three months increased by 0.7 percentage point to 12.0% in June, the highest reading since January 2023. The increase was driven by respondents with no more than a high school education.
- The median expectation regarding a year-ahead change in taxes (at current income level) increased by 0.2 percentage point to 4.3%.
- Median year-ahead expected growth in government debt increased from 9.7% in May to 10.0% in June.
- The mean perceived probability that the average interest rate on saving accounts will be higher in 12 months decreased by 0.5 percentage point to 29.8%, the lowest reading since December 2021.
- Perceptions about households’ current financial situations improved in June with more respondents reporting being better off than a year ago and fewer respondents reporting being worse off. Similarly, year-ahead expectations improved with fewer respondents expecting to be worse off a year from now and more respondents expecting to be better off.
- The mean perceived probability that U.S. stock prices will be higher 12 months from now increased by 1.0 percentage point to 35.3%.
More in the full survey available here.
