Consumer Expectations Rise Slightly Along with Inflation Fears

Another survey has found a slightrnoverall improvement in consumer attitudes toward the economy.   The New York Federal Reserve Bank said thatrnits monthly Survey of Consumer Expectations (SEC) for March showed increasinglyrnpositive attitudes toward income growth, employment, and access to credit.  At the same time consumers appear more waryrnabout the possibility of inflation and have moderated their outlook toward therngrowth of home prices. </p

Consumers’ expectations about medianrnearnings growth over the next six months had remained flat from the survey’srninception in June 2013 but began to climb at the beginning of this year and rosernto 2.4 percent in March, the survey’s highest point, from 2.26 percent inrnFebruary.   The Fed said the expectation of higher wagesrnincreased among consumers everywhere but in the Midwest.  </p

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Another improvement was noted inrnconsumer attitudes about keeping or if necessary finding a job.  Respondents were asked a series of questionsrnabout losing or voluntarily leaving their jobs and the percent chance ofrnfinding an acceptable new position within three months.  As might be expected there was wide variationrnacross demographic groups, but the mean perceived chance of being laid offrndeclined slightly to about 16 percent (it peaked at over 17 percent last fall),rndriven by a drop in perceived layoff risk among college graduates.  The overall expectation of finding anotherrnjob rose to 49 percent from 46.1 percent in February.  The likelihood that one might quit voluntarilyrnfell slightly as well, falling under 20 percent for the first time sincernSeptember.</p

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Expectations aboutrnhome price increases have moderated since the beginning of the year.  The January survey elicited a peak pricernincrease projection of 4.64 percent.  Thisrndropped to 4.0 percent in February and to 3.81 percent in the most recentrnsurvey, matching the low point in Octoberrn2013.rn  This pattern did not hold in the Westrnwhere respondents expected a higher rate of increase.</p

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Perceptions of credit availabilityrnimproved slightly, with fewer people finding it harder to obtain credit todayrncompared to a year ago. Debt delinquency expectations also declined slightly.rn</p

Concern about inflation rose,rnespecially among groups with lower education. rnConsumers had a median expectation of a 3.20 percent rise in inflation overrna one-year horizon and a 3.38 percent increase over three years.  This is an increase from the 3.09 percent andrn3.18 percent respectively reported in February.</p

A question about the likelihood of arnrespondent changing residence over the next year garnered a 20 percent positivernresponse, virtually unchanged over the life of the survey.  There is significant variation on a regionalrnbasis, however, with participants in the Northeast far less likely tornanticipate a move (13.96 percent) than those in the West (22.31 percent.)  This regional pattern has also beenrnconsistent; a third of westerners indicated they could relocate in one earlyrnsurvey edition.  </p

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The SEC is designed to providerninformation about how consumers expect overall inflation and its componentrnprices to behave and to gather data about American attitudes toward jobrnprospects, earnings growth, and other concerns. rnIt also provides measures of uncertainty about the main economic outcomes.  The survey is conducted on-line among arnrotating panel of about 1,200 heads of household each of whom participates inrnthe panel for up to twelve months, allowing survey managers to observe changesrnin expectations and behaviors over time.

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