Consumers Expect to Spend More, NY Fed Reports

Expected spending growth surges from 5.5% to 6.4%; expected inflation now 6.0%

After a dip in January 2022, expectations about inflation over the next 12 months among U.S. consumers rose in February, the Federal Reserve Bank of New York reports. The median expectation among respondents is that inflation will be 6.0% during the next 12 months, declining to an average annual rate of 3.8% across the next three years. These represented increases of 0.2 and 0.3 percentage points, respectively, from the January survey.

Expectations about median home prices, however, dipped. Views regarding year-ahead earnings growth were unchanged. Expectations about unemployment, job losses, and job finding all improved, but anticipated future access to credit dropped sharply. Most notably, the projected increase in consumer spending during the year ahead, up from 5.5% in January to 6.4% in February, was a new high for the series, which began in June 2013.

These findings are according to the February 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 March 14, 2022. In addition to inflation, the SCE also includes respondents' views on the labor market and household finance. Key findings in all these areas are summarized below.

Key Takeaways

  • In February 2022, U.S. consumers expected 6.0% inflation over the next 12 months and 3.8% over the next three years, up from the January survey.
  • Consumers expect to spend 6.4% more over the next 12 months, a new survey high since June 2013.
  • Expected increases in home prices have dipped since the January survey.
  • More respondents report deteriorating finances over the past year.
  • However, the shares of those expecting to be better off or worse off a year from now both rose.

Inflation: Overall

As noted above, the median expectation about inflation over the next 12 months rose to 6.0% in February, up from 5.8% in December. This matches the series high set in November 2021.

Also, as noted above, the median inflation expectation for the next three years increased by 0.3 percentage points to 3.8%. This comes after a sharp decline in January but is below its November and December 2021 levels of 4.2% and 4.0%, respectively.

The median level of uncertainty expressed by survey respondents about future inflation fell slightly at the one-year horizon but rose slightly at the three-year horizon. Both measures remain well above their pre-pandemic readings from February 2020.

Inflation: Home Prices

The median expectation about the increase in home prices over the year ahead dropped to 5.7% in February from 6.0% in January. The decline was most evident among respondents without a college education.

Inflation: Commodities

Expectations about commodity price changes rose across the board in February. Median expectations about the year-ahead price changes for food and gasoline increased by 3.3 and 1.5 percentage points to 9.2% and 8.8%, respectively. The median year-ahead expected change in the costs of medical care and college educations increased to 9.6% and 9.0%, from 9.5% and 7.3%, respectively. The median expected one-year-ahead change in the price of rent increased to 10.1%, from 9.8%.

Labor Market

The median expected earnings growth for the year ahead was unchanged for the second consecutive month at 3.0% in January. This remains above its 12-month trailing average of 2.6%.

The mean, or average, perceived probability among respondents that the U.S. unemployment rate will be higher one year from now fell by 1.5 percentage points to 34.4%.

The mean perceived probability of losing one's job sometime during the next 12 months dropped by 0.8 percentage points to 10.8%, reaching a new series low. The mean probability of leaving one's job voluntarily in the next 12 months decreased from 19.3% to 18.9%.

The mean perceived probability of finding a job, should the respondent's current job be lost, rose from 55.6% to 55.7%, but it remains above its 12-month trailing average of 54.0%. Respondents without a high school diploma had the largest impact on this improvement in outlook.

Household Finance

The median expectation about the growth in household income over the next 12 months was 3.2% in February, down from 3.3% in January. However, it was still above its trailing 12-month average of 3.0%.

The median expectation about the growth in household spending over the next 12 months surged from 5.5% in January to 6.4% in February. This is a new high since the series began in June 2013. The increase was broad-based across age, income, and education categories.

More respondents report that they are finding it harder to obtain credit now than a year ago. Expectations about future credit availability deteriorated "considerably" as well.

More respondents reported being financially worse off than they were a year ago. However, views about their financial situations a year from now were mixed. Compared to January, the respective shares of respondents expecting to be better off and worse off both increased, the upshot being that the share expecting to be in about the same condition declined.

Survey Methodology

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.

Article Sources

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  1. Federal Reserve Bank of New York. "Consumer Spending Growth Expectations Spike, While Inflation Expectations Edge Back Up."

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