US households’ perceptions and expectations about their current and future financial situations both eroded in May as their expectations for inflation in the next year increased, according to the New York Fed’s monthly Survey of Consumer Expectations.
The one-year ahead median inflation expectations increased to 6.6% in May, up from 6.3% in April and tying the highest reading of the series since it started in June 2013. The median three-year-ahead inflation expectations measure stayed at 3.9% .
Earnings growth expectations remained unchanged at a series of high of 3.0% for the fifth straight month. With the expectations of inflation increasing over the next year, that means consumers are expecting to see their spending power deteriorate.
Consumers also see their household income increasing less than the rate of inflation, undermining consumer purchasing power. The median expected growth in household income fell by 0.1 percentage point to 3.0% in May, while median household nominal spending growth expectations jumped to 9.0% from 8.0% in April – the fifth straight increase and a new series high.
More respondents said they’re financially worse off than they were a year ago. Expectations for the year ahead also fell in May.
The mean perceived probability of losing one’s job in the next 12 months rose by 0.3 percentage point to 11.1%, still well below the series’ 2021 average of 12.5%. And the mean perceived probability of finding a job, if one’s current job was lost, rose to 58.2% from 57.4% in April.
Previously (May 9), In the April survey, inflation expectations eased for one-year horizon, rose for three-year outlook