Federal Reserve: U.S. one-year inflation expectations for October drop to a four-year low, labor market expectations improve

On Tuesday, according to the latest survey released by the Federal Reserve Bank of New York, short-term, medium-term, and long-term inflation expectations among respondents in October have all slightly decreased. Expectations for the labor market have improved. The one-year inflation expectation in the U.S. for October has dropped to 2.87%, the lowest level since October 2020, with market expectations at 2.97% and the previous value in September at 3%. People's medium- and long-term inflation expectations have also retreated, with the three-year inflation expectation decreasing by 0.2 percentage points to 2.5%, and the five-year inflation expectation decreasing by 0.1 percentage points to 2.8%. The median uncertainty regarding one-year inflation expectations remains unchanged, while the median uncertainty for three-year and five-year inflation expectations has decreased. By category, the expected price growth for various sub-items over the next year in October is as follows: The median expected growth in housing prices remains unchanged at 3.0%. Since August 2023, this series of readings has fluctuated narrowly between 3.0% and 3.3%. The expected increase in rent is projected to decrease by 0.4 percentage points to 5.9%. The expected increase in gasoline prices is projected to decrease by 0.2 percentage points to 3.2%. The expected increase in food prices is projected to decrease by 0.2 percentage points to 4.3%. The expected increase in college education costs is projected to decrease by 0.2 percentage points to 5.7%. The expected increase in medical costs has decreased by 0.8 percentage points to 5.8%, the lowest reading since January 2020. Expectations for the U.S. labor market have improved, with households reporting a rise in unemployment rates and a decreasing likelihood of unemployment; if laid off, the chances of finding a new job are expected to be higher. The following are key points related to the labor market from the latest Federal Reserve survey: The median expectation for wage growth over the next year in October remains at 2.8%. Since January of this year, this series of readings has fluctuated narrowly between 2.7% and 3.0%. The average expectation among respondents for an increase in the unemployment rate over the next year has decreased by 1.7 percentage points to 34.5%, the lowest level since February 2022. The average perceived probability of unemployment in the next 12 months has decreased by 0.3 percentage points to 13.0%. This decline is most pronounced among respondents under 40 and those with a college degree. The average probability of voluntarily leaving a job in the next 12 months has increased by 0.1 percentage points to 20.5% If the current job is lost, the average perceived probability of finding a new job has increased by 3.3 percentage points to 56.0%, the highest reading since October 2023. This increase is most pronounced among respondents with a high school education or below. The main findings regarding household finances are as follows: The median expected income growth for surveyed households in October remained unchanged at 3.0%. Since January 2023, this series of readings has fluctuated narrowly between 2.9% and 3.3%. The median expected growth in household spending remained unchanged at 4.9%, still well above pre-COVID levels. In October, perceptions of credit availability and expectations for future credit access improved. The net share of households reporting that obtaining credit is harder than a year ago decreased. The average perceived probability of being unable to repay minimum debt in the next three months decreased by 0.3 percentage points to 13.9%, marking the first decline since May of this year. The decline is most pronounced among those under 40. However, this series of readings remains above its average of 12.6% over the past 12 months. The survey also showed that the average perceived probability of an increase in savings account interest rates in 12 months decreased by 0.5 percentage points to 4.6%. The average perceived probability of U.S. stock prices rising in 12 months decreased by 1.2 percentage points to 39.1%. Consumer confidence affects economic growth in the coming months. Pessimistic consumer sentiment can suppress spending levels, thereby impacting economic recovery, while optimistic consumer sentiment contributes to future economic growth