Americans’ short-term inflation expectations continue to rise, according to June survey results released on Monday by the Federal Reserve Bank of New York.
According to the central bank’s Survey of Consumer Expectations, Americans foresee one-year-ahead inflation hitting 6.8% — an increase from 6.6% in May and the highest level since the survey began in 2013. In the medium-term, however, inflation expectations for the next three years fell from 3.9% to 3.6%, while five-year-ahead forecasts declined from 2.9% to 2.8%.
“Disagreement across respondents in their five-year ahead inflation expectations has been trending up during this period and increased again in June,” according to the New York Fed. “Median inflation uncertainty — or the uncertainty expressed regarding future inflation outcomes — increased at the one-year ahead horizon to a new series high, but remained unchanged at the three-year ahead horizon. Uncertainty at the five-year ahead horizon increased.”
Nearly 70% of the United States’ economic output hinges upon consumer spending, according to the U.S. Bureau of Economic Analysis, and a drop in consumer sentiment often occurs alongside a recession. Indeed, as other signs appear to point toward an economic downturn, the University of Michigan’s benchmark Survey of Consumers reached its lowest level since 1952 in May.
Beyond expected increases in price levels, the median expected change in home prices one year from now fell from 5.8% to 4.4%. The change occurs as mortgage rates continue to rise and sentiment among home builders plummets.
Meanwhile, consumers foresee paying 0.1% more for gas, rent, medical care, and college education. As gas and food prices increase at their highest paces in decades, inflation continues to surpass nominal wage growth — leading to a 3% year-over-year drop in real wages as of May.
Americans are therefore relying upon savings to make ends meet. The personal saving rate — the portion of disposable income Americans devote to savings — was 5.4% as of May, according to a report from the U.S. Bureau of Economic Analysis. Remaining below 6% for every month of 2022, the measure is far from the typical 7% to 9% seen over the previous decade.
National average gas prices have seen a decline from above $5.00 per gallon in early June to $4.68 per gallon as of Monday, according to AAA. On the day of President Joe Biden’s inauguration, gas cost $2.39 per gallon.
With respect to the labor market, 40.4% of Americans anticipate unemployment one year from now to be higher than current levels — an increase of 1.8% since May. Though the mean perceived probability of losing one’s own job over the next year rose from 11.1% to 11.9%, the metric remains below the 13.8% level in February 2020. Unemployment remained at 3.6% for the fourth month in a row, the U.S. Bureau of Labor Statistics said on Friday.
President Biden has touted low unemployment as a silver lining amid a troubled economic landscape. “The historic strength of our job market is one reason our economy is uniquely well positioned to tackle a range of global economic challenges — from global inflation to the economic fallout from Putin’s war,” Biden said last week. “No country is better positioned than America to bring down inflation, without giving up all of the economic gains we have made over the last 18 months.”
Source: Dailywire
