Fed Survey: Consumers' inflation expectations for the next three years are rising, with mixed views on the labor market outlook

On Monday, according to the New York Fed's Consumer Expectations Survey, the one-year inflation expectation for August rose slightly from 2.97% in the previous month to 3%. The median expectation for inflation over the next three years has slightly rebounded from the low point in July, rising from 2.3% to 2.5%, while the five-year inflation expectation remains steady at 2.8%. Specifically, consumers expect the following changes in the next year: Gasoline prices are expected to rise by 3.62%, an increase of 0.1 percentage point from the previous month. Food prices are expected to rise by 4.42%, a decrease of 0.3 percentage point from the previous month. Medical expenses are expected to rise by 7.97%, an increase of 0.4 percentage point from the previous month. College education costs are expected to rise by 5.86%, a decrease of 1.3 percentage points from the previous month. Rent prices are expected to rise by 7.31%, an increase of 0.2 percentage point from the previous month. The median house price growth expectation has increased from 3% in July to 3.1% in August, reaching the highest level since May. Consumers' uncertainty about inflation expectations is increasing. There is a wide disparity in people's views on the future inflation trend: looking ahead over the next five years, a quarter of consumers expect the inflation rate to drop to zero or lower, while another group of respondents believe the inflation rate will double to 6% or higher. Financial blog Zerohedge commented that the Federal Reserve is focusing on its employment responsibilities and will initiate a loose cycle. With U.S. stocks, housing prices, rents, and food prices all at historical highs, the risk of being caught off guard in the future is increasing. The latest survey report from the New York Fed indicates the possibility of this scenario. Consumers' expectations for household income have slightly improved, rising by 0.1 percentage point to 3.1%. Over the past year, the expected increase in household income has remained within a narrow range of 3.0% to 3.1%. The median growth expectation for household spending has increased by 0.1 percentage point to 5.0%. Since November 2023, the growth expectation for household spending has fluctuated within a narrow range of 4.9% to 5.2%, significantly higher than the 3.1% in February 2020. The New York Fed's survey report also shows that the proportion of consumers expecting to be unable to pay the minimum repayment amount in the future has increased by 0.3 percentage points to 13.6%, the highest level since April 2020. In the highly anticipated labor market aspect, the latest survey report from the New York Fed shows that people have mixed expectations about the labor market, with overall stability: The median expectation for income growth over the next year has risen from 2.7% to 2.9%, slightly higher than the average level of 2.8% over the past 12 months. This growth is most pronounced for respondents with annual incomes below $50,000 The average expected unemployment rate, which is the average probability of the expected U.S. unemployment rate being higher one year from now than it is currently, rose from 36.6% in July to 37.7% in August. The average perceived probability of being unemployed in the next 12 months decreased by 1 percentage point to 13.3%, lower than the average level of the past 12 months at 13.7%. The average probability of voluntary quits in the next 12 months decreased from 20.7% to 19.1%, slightly lower than the average level of the past 12 months at 19.4%. If unemployed, the average probability that people believe they can find a job decreased by 0.2 percentage points to 52.3%, lower than the average level of the past 12 months at 53.9%, and even lower than the 55.7% from the same period last year.