According to a recent survey by the New York Federal Reserve, household spending is expected to decrease significantly over the next year. The Survey of Consumer Expectations for April revealed that the outlook for spending had fallen by half a percentage point to an annual rate of 5.2%, the lowest level since September 2021. This decreased spending outlook is reflective of downbeat consumer sentiment and a potential inflation slowdown.
The survey also showed a corresponding decline of 0.3 percentage point in the overall outlook for inflation over the next year. Respondents expect an inflation rate of about 4.4% in the next 12 months, which is still well above the three-year and five-year outlooks of 2.9% and 2.6%, respectively. While these levels are still above the Fed’s 2% inflation target, they are drifting closer to the goal.
These results come less than a week after the Fed approved its 10th consecutive interest rate hike since March 2022, taking the benchmark fed funds rate to a target range of 5%-5.25%, the highest level since August 2007. Fed officials hinted that this month’s increase could be the last for a while as they assess the impact of all the preceding monetary policy tightening.
Consumers’ outlook for gas prices to climb by 5.1% over the next year increased by half a point from the March survey. The projection for food prices to rise decreased by 0.1 percentage point to 5.8%. The outlook for college costs dropped sharply, falling to an expected increase of 7.8% that was 1.1 percentage points lower than March.
The median outlook for earnings growth remained unchanged at 3%, while the employment outlook worsened. The likelihood of the unemployment rate being higher a year from now increased to 41.8%, a 1.1 percentage point increase. The jobless rate for April fell on Friday to 3.4%, tied for the lowest since May 1969.
Lastly, the one-year outlook for home price appreciation rose to 2.5%, the highest since July 2022, and a 0.7 percentage point increase from March.
Leave a Reply