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Consumers Are Upbeat About Finances, Credit Access and Earnings

February 13, 2018 / Source: Bank News

February 12 — The New York Fed’s Center for Microeconomic Data has released the January 2018 Survey of Consumer Expectations. The results show continued improvement in expectations about households’ yea-ahead financials and credit availability as well as robust expectations for earnings growth. Short- and medium-term inflation expectations also fell slightly.

Median inflation expectations declined by 0.1 percent for both the one-year and three-year horizon, falling to 2.7 and 2.8 percent, respectively. The survey shows the decline was driven by lower income (less than $50,000) respondents. Median inflation uncertainty also declined at both horizons.

Home price change expectations increased from 3.2 percent in December to 3.5  percent in January, the highest reading since May 2017 — well above the trailing 12-month average of 3.2 percent. The mean probability of changing residence within the next year, which has been falling since November 2013, continued to decline to a new low of 15.9 percent.

Expected gas prices are up o.2 percent from December at 4.3 percent, but expected food prices have declined from 4.6 percent to 4.3 percent. Expected medical care costs also decreased from 9.5 percent to 9.2 percent.

Year-ahead earnings growth expectations increased slightly, reachign a new series’ high, and earnings growth uncertainty increased to a level not seen since August 2016. The mean probability that the U.S. unemployment rate will be higher one year from now decreased slightly from 33.5 percent to 32.4 percent; however, the mean perceived probability of losing one’s job in the next year increased from 13.8 percent in December to 14.9 percent in January, and the mean probability of leaving one’s job voluntarily in the next 12 months increased from 21.7 percent to 22.1 percent. Mean perceived probability of finding a job (if currently unemployed) declined from 60 percent to 59.7 percent.

Expected household income growth held steady at 2.8 percent, as did household spending growth expectations, continuing at 2.9 percent. The proportion of respondents expecting easing in credit access reached a new series’ high of 24.7 percent, and perceptions of credit access today compared to 12 months ago also improved with 27.3 percent reporting easier credit access within the past year. Average perceived probability of messing a minimum debt payment over the next three months decreased from 12.5 percent to 12.3 percent.

A quarter of the survey’s respondents expect a tax decrease of more than 2.6 percent, and although this response was broad-based, higher-income (over $100,000) drove this outcome. This is in keeping with perceptions of household financial situations improving. Almost 39 percent of respondents feel they are better off and 45.7 percent expect to be better off financially, compared to 37 percent and 43.2 percent in December, respectively.

Consumers also expect that stock prices and savings account interest rates will rise.

The report is based on a nationally representative, internet-based survey of a rotating panel of approximately 1,300 household heads. Respondents participate in the panel for up to 12 months, with a roughly equal number rotating in and out of the panel each month. Unlike comparable surveys based on repeated cross-sections with a different set of respondents in each wave, the panel allows analysts to observe the changes in expectations and behavior of the same individuals over time.

More information can be found here.