In December, American consumers showed a significant rise in their inflation expectations for the upcoming three years, although their concerns about unemployment displayed mixed signals, as reported by the Federal Reserve Bank of New York's recent monthly survey.
The median inflation expectation for the one-year term remained steady at 3.0 percent. However, for the three-year outlook, it rose from 2.6 percent to 3.0 percent. For a longer five-year forecast, price growth expectations dipped to 2.7 percent down from 2.9 percent.
In a parallel release, the University of Michigan's survey from Friday indicated that inflation expectations for the coming year surged to 3.3 percent in January, up from 2.8 percent in December, marking the highest level since May 2024. Long-term inflation expectations in this survey also climbed to 3.3 percent in January from 3.0 percent in the previous month.
The New York Fed's survey revealed an increase in household uncertainty about inflation outcomes for both the one- and three-year projections, although this uncertainty diminished somewhat for the five-year forecast.
Expectations for consumer earnings growth and unemployment over the next 12 months showed a decline. Nonetheless, confidence in securing employment if faced with job loss sharply decreased, reaching its lowest point since April 2021.
Additionally, households' expectations for income growth have lessened, yet their anticipated spending is on the rise. Notably, there was a significant rise in the perceived likelihood of missing a minimum debt payment in the next three months, matching September 2024's level, the highest such figure since April 2020, according to the survey.
