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posted on 09 August 2016

July 2016 Consumers' Income and Spending Growth Expectations Strengthen Whilst Labor Market Expectations Weaken

from the New York Fed

Results from the July 2016 Survey of Consumer Expectations show steady short-term inflation expectations but a decline in medium-term inflation expectations. Labor market expectations generally deteriorated, with a decline in earnings and job finding expectations. On the other hand, expectations related to household finance were optimistic: there was an increase in household income and spending growth expectations, and an improvement in future perceived credit access and financial situation.

The main findings from the April 2016 Survey are: [you can access the data here]:

Inflation

  • Median year-ahead expected earnings growth declined from 2.5 percent in June to 2.2 percent, back to their May level. The decrease was driven by individuals with a high school degree or less.
  • Median home price expectations increased from 3.1 percent in June to 3.3 percent, their highest level since June last year. The increase was driven by respondents in the West and Midwest, and those with higher incomes (>$100k per year).
  • Median year-ahead gasoline price expectations declined from 5.3 percent in June to 4.9 percent, their lowest level since February of this year. Expectations about changes in the price of a college education rose by a full percentage point from June to 6.8 percent.

Labor Market

  • Median year-ahead expected earnings growth declined from 2.5 percent in June to 2.2 percent, back to their May level. The decrease was driven by individuals with a high school degree or less.
  • The mean perceived probability of losing one's job in the next 12 months increased from 13.8 percent in June to 15.0 percent, while the mean probability of leaving one's job voluntarily in the next 12 months rose from 20.0 percent to 21.0 percent. Both increases were most notable for younger (less than 40 years) respondents, those without a college degree and those with incomes of less than $50,000.
  • The mean perceived probability of finding a job (if one's current job were lost) continued its decline, dropping to 53.3 percent, down from 53.6 percent in June and 55.4 percent in May. The decrease was driven by older (over 60) respondents.

Household Finance

  • Median expected household income growth continued to increase, rising to 2.8 percent, up from 2.75 percent in June and 2.4 percent in May. The increase was driven by younger household heads.
  • Median household spending growth expectations also continued their upward trend. The July reading was 3.8 percent, up from 3.6 percent in June and 3.5 percent in May. This was a result of an increase in the expectations of household heads aged 40 and older, and those with more than a high school degree.
  • Perceptions of credit access relative to a year ago were unchanged, while expectations regarding year-ahead credit availability improved somewhat.
  • The average perceived probability of missing a minimum debt payment over the next three months continued its upward trend, increasing to 14.1 percent, up from 13.3 percent in June and 11.8 percent in February this year. This is its highest level since September 2014. The uptick was most pronounced for household heads below the age of 40 (for whom the average likelihood rose from 16.6 percent in June to 20.9 percent) and those with a high school degree or less.
  • Expectations regarding the household's future financial situation have improved somewhat. Compared to last month, the proportion of respondents who expect to be financially better off in a year (compared to today) increased 3.1 percentage points to 36.2 percent.

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. The sampling frame for the SCE is based on that used for The Conference Board's Consumer Confidence Survey (CCS). Respondents to the CCS, itself based on a representative national sample drawn from mailing addresses, are invited to join the SCE internet panel.

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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