Fed survey: Inflation expectations flat; income expectations dip

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Consumers’ inflation expectations held steady, but respondents’ optimism about labor conditions and income slipped, according to the March Survey of Consumer Expectations, released by the Federal Reserve Bank of New York on Monday.

“Consumers were less optimistic about labor market outcomes,” according to the survey, “In particular, expectations about income growth, the U.S unemployment rate, and the probability of losing one’s job all deteriorated slightly in March.”

Median inflation expectations stayed at 2.8% for a one-year period and 2.9% for a three-year horizon.

Turning to labor, the expected earnings growth for one-year slid to 2.6% from 2.7%. The mean perceived probability of losing one’s job in the next 12 months grew to 13.9% from 12.8%, while the mean probability of leaving one’s job voluntarily in the next 12 months fell to 19.3% — its lowest since July 2013 — from 21.4%.

The probability of finding a job, if one lost his/her current job, fell to 57.6% from 59.7%.

Median one-year ahead home prices are expected to grow 3.5%, up from 3.3% last month, the Fed said, above its 2017 average of 3.2%.

“Households’ perceptions about their financial situations improved slightly in March, with the proportion of respondents feeling they are better off than a year ago increasing 0.2 percentage points to 40.4%,” the survey noted. “In contrast, expectations of households’ financial situations worsened, with the proportion of respondents expecting to be worse off financially a year from now increasing 1.7 percentage points to 11.8% in March.”

Median household spending expectations increased to 3.1% from 3.0%. Income growth expectations fell to 2.9% from 3.0%. “The decrease was most pronounced among younger (less than 40 years old) and lower income (annual income below $50,000) respondents,” according to the survey.

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Economic indicators Federal Reserve Bank of New York