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posted on 08 June 2015

Consumers Expectations May 2015 Shows Expected Income Growth Mixed

from the New York Fed

The results from the May 2015 Survey of Consumer Expectations indicate that median one-year ahead inflation expectations rose to 3.0 percent. Median earnings growth expectations declined for the second consecutive month to 2.3 percent, driven by younger and higher income workers. On the other hand, median household income and spending growth expectations increased slightly, with more pronounced increases for lower income households.

Other findings from the survey include [you can access the data here]:

Inflation

  • Median one-year ahead inflation expectations increased to 3 percent from 2.7 percent in April. Median three-year ahead expectations remained stable at 3 percent, while inflation uncertainty declined slightly at the three-year ahead horizon.
  • The median expected home price change has remained essentially flat at 3.3 percent. The expected home price change has been gradually declining from 4 percent from a year ago. At the regional level, expected home price appreciation has risen somewhat in the West and Midwest, and declined in the South and Northeast.
  • Gas inflation expectations have continued to rebound to 5.8 percent from the significant decline observed in Fall 2014. Expectations for changes in medical care costs and the cost of college education have declined significantly to 7.6 percent and 6.7 percent respectively. These are the lowest points in both cases since the survey began in June 2013.

Labor Market

  • Median one-year ahead earnings growth expectations declined to 2.3 percent from 2.45 percent in April and 2.6 percent in March. This decline was driven by younger workers and respondents with incomes above $100,000.
  • Job separation expectations decreased slightly: the mean perceived probability of losing one's job has been declining since September 2014 and reached a new low in May at 13.8 percent. However, the mean perceived probability of leaving one's job voluntarily (typically an indicator of prospective wage growth) has also declined slightly to 20.3 percent from 20.7 percent in April.
  • The mean perceived job finding probability (in the next three months, conditional on losing one's job today) remained essentially unchanged at 54.2 percent, towards the high end of the range observed since the inception of the survey. The gap in perceived job finding probability widened across age groups, with the mean probability improving to 64.7 percent for workers under 40 but declining to 30.8 percent for workers 60 years and older.

Household Finance

  • The median one-year ahead household income growth expectation increased slightly to 2.9 percent, matching the series' high attained in March. Income growth expectations improved particularly for respondents 40 to 60 years old, and for lower-income households.
  • Median one-year ahead household spending expectations increased to 4.0 percent from 3.8 percent in April, but remained at the low end of the (3.8 percent - 5.0 percent) range observed since the beginning of the survey. The 25th percentile of expected spending growth declined to 0.7 percent, a new series low. Spending growth expectations improved for younger, lower-income and lower-education respondents and worsened for college educated and high-income respondents.
  • The perceived change in credit availability compared to a year ago improved slightly from April, while the expected change in credit availability one year from now remained essentially unchanged. The average probability of missing a minimum debt payment over the next three months decreased by 0.6 percentage points to 11.4 percent, maintaining its overall declining trend and reaching a new series low.

About the Survey of Consumer Expectations

The SCE contains information about how consumers expect overall inflation and prices for food, gas, housing and education to behave. It also provides insight into Americans' views about job prospects and earnings growth and their expectations about future spending and access to credit. The SCE also provides measures of uncertainty in expectations for the main outcomes of interest. Expectations are also available by age, geography, income, education and numeracy.

The SCE is a nationally representative, internet-based survey of a rotating panel of approximately 1,200 household heads. Respondents participate in the panel for up to twelve 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, our panel allows us to observe the changes in expectations and behavior of the same individuals over time.

The survey is conducted on our behalf by The Demand Institute, a non-profit organization jointly operated by The Conference Board and Nielsen.

About the SCE Credit Access Survey

The SCE Credit Access Survey, fielded as part of the SCE (Survey of Consumer Expectations), provides information on consumers' experiences and expectations regarding credit demand and credit access. Every four months, SCE panelists are asked whether they applied for credit in the past 12 months, and the resulting outcomes. They are also asked about their expectations of applying for credit over the next twelve months, and the perceived likelihood of those applications being accepted. We collect this information for five specific credit products: auto loans, credit cards, credit card limit increases, mortgages, and mortgage refinancing. Survey findings (in instances with sufficient sample sizes) are also presented separately by age and self-reported credit score subgroups.

A full set of interactive charts detailing the monthly SCE Credit Access Survey findings can be found here.

More information about the SCE survey goals, design, and content can be found here.


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