Survey: Inflation expectations in the US will decline significantly in the medium term

According to the July 2024 Consumer Expectations Survey recently released by the Federal Reserve Bank of New York's Center for Microeconomic Data, inflation expectations in the United States remained stable in the short and long term, but fell sharply to a new low in the medium term.

Median inflation expectations for the next one and five years remained unchanged in July at 3 percent and 2.8 percent respectively.

In contrast, average inflation expectations for the next three years fell significantly by 0.6 percentage points to 2.3 percent, reaching a low since the survey began in June 2013.

According to a survey conducted in July, inflation expectations in the US remained stable in the short and longer term, but fell sharply to a new low in the medium term. Median inflation uncertainty remained unchanged in all three periods. Average unemployment expectations fell by 1 percentage point to 36.6 percent in July.

The survey's measure of disagreement among respondents (the difference between the 75th and 25th percentiles of inflation expectations) decreased over the one- and five-year periods and remained unchanged over the three-year period.

Mean inflation uncertainty – or uncertainty expressed in terms of future inflation developments – remained unchanged across all three horizons.

Expectations for the labor market are mixed: respondents expected lower income growth and a lower likelihood of finding a new job within three months in the event of a layoff, the center said in a press release.

Payment delay expectations continued their upward trend in July, rising to their highest level since April 2020.

The median expected earnings growth for the coming year fell by 0.3 percentage points to 2.7 percent in July. Since January 2024, the range has been within a narrow range of 2.7-3 percent.

The average unemployment expectation – or the average probability that the U.S. unemployment rate will be higher in a year – fell 1 percentage point to 36.6 percent, remaining below its 12-month average of 37.7 percent.

The average perceived probability of losing one's job in the next twelve months fell by 0.5 percentage points to 14.3 percent. The average probability of voluntarily leaving one's job in the next twelve months rose by 0.2 percentage points to 20.7 percent. This is the highest value since February 2023.

The average perceived probability of finding a job again if one loses one's current job fell by 0.9 percentage points to 52.5 percent.

Average expectations for home price growth remained unchanged at 3 percent in July.

The median expected growth in household income remained unchanged at 3 percent in July. Since January 2023, this series has been moving in a narrow range between 2.9 percent and 3.3 percent.

Average expectations for household spending growth fell 0.2 percentage points to 4.9 percent, the lowest since April 2021.

Fibre2Fashion News Desk (DS)