Fed survey: Inflation expectations tick up; government debt to soar

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Consumers’ inflation expectations crept higher, but respondents are wary about government debt levels, according to the February Survey of Consumer Expectations, released by the Federal Reserve Bank of New York on Monday.

“Consumers’ expectations about their personal financial situations continued to improve,” according to the survey, “Expectations about changes in taxes declined to a new series’ low, while expectations about growth in government debt increased sharply.”

Median inflation expectations grew to 2.8% in January from 2.7% in January for a one-year period and increased to 2.9% from 2.8% for a three-year horizon.

Turning to labor, the expected earnings growth for one-year held at 2.7%, a series high. The mean perceived probability of losing one’s job in the next 12 months slid to 12.8% from 14.9%, while the mean probability of leaving one’s job voluntarily in the next 12 months fell to 21.4% from 22.1%.

The probability of finding a job, if one lost his/her current job, remained at 59.7%.

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

“Consumers’ expectations about their financial situations compared to a year ago improved and reached its highest level since the inception of the survey in June 2013, with 40.2% of respondents feeling they are better off,” the survey noted. “One-year ahead expectations of households’ financial situations also improved with only 10.2% of respondents expecting to be worse off financially, compared to 12.5% in January.”

Median household spending expectations increased to 3.0% from 2.9%. Income growth expectations gained to 3.0% from 2.8%.

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Economic indicators Federal Reserve Bank of New York