Consumers are displaying a bit of bearishness toward the
economy according a Federal Reserve Bank of New York's recent survey of how
they expect overall inflation and
prices for food, gas, housing and education to behave. The December Survey of Consumer Expectations (SCE indicates that median expectations about
growth in household income, earnings and especially household spending all
declined while there were mixed feelings about job security.
The SEC queries a rotating panel of
1,200 household heads. The sample, structured
to be nationally representative, is designed to observe changes in expectations
and behavior of the same individuals over time with respondents remaining on the
panel for up to 12 months and an approximately equal number rotating in and out
each month. The survey is Internet based
and is conducted for the New York Fed by The Demand Institute,
a non-profit organization jointly operated by The Conference Board
and Nielsen. The
sampling frame for the SCE is based on that used for The Conference Board's
Consumer Confidence Survey (CCS).
predictions about inflation were essentially unchanged, with a median expectation
of 2.5 percent over the next year tying the survey low set in November. Longer term expectations rose slightly with
the three year horizon up 0.1 point from the previous month - also a survey low
- to 2.8 percent. Uncertainty about
inflation declined for both one-year and three-year horizons to new survey
Consumers expect home
prices to rise a median of 3.0 percent, slightly lower than in November and
matching earlier survey lows established in February and August 2015. Expectations for other individual item price
changes also declined slightly in the one-year window.
Responses to questions about the labor
market were mixed in tone. Predictions
about the growth in earnings over the next year declined from a median of 2.5
percent to 2.0 percent, the largest one-month drop in survey history, returning
responses to the level last seen two years earlier. The decline was widespread
across all age groups, and especially strong for low education and
The perceived probability of losing a
job decreased slightly from a mean of 14.1 to 13.5 percent - the second lowest
reading since the start of the survey. The decline was driven by older, lower
education and lower income workers. The perceived probability of leaving a job
voluntarily also declined and is at the lower end of the survey's historic range.
But if respondents were slightly more
optimistic about keeping their job they were less so about finding a new one
within three months should they lose it.
Responses there decreased from the November series high to 55.1 percent,
although still high in the historic context.
Expectations for household income
growth over the next year diminished from a median increase of 2.6 percent in
November to 2.3 percent. This is an even
more pronounced drop when compared to the 2.7 to 2.9 percent range of responses
in the first nine months of the year. This
decline seems to be driven by younger, higher education and higher income
Household spending is also projected to
decline, going from a one-year ahead median of 3.6 percent in November to 2.9
percent, the lowest level since the inception of the survey in June 2013. The
decline was particularly strong among older, lower education and lower income
Credit availability is perceived to be
unchanged over the past year by about the same percentage of respondents as in
November and expectations for change over the next year also remained the
same. The mean perceived probability of
higher average interest rates on savings accounts over the next year reached a
new series high at 35.1 percent.