In March 2023, there was an increase in the median perceived inflation rate over the past 12 months. It went from February’s 8.7% to 9.9%, reflecting an increase in inflation expectations.

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Inflation predictions for the following year jumped from 4.6% in February to 5.0%. Besides, the rise continued for the subsequent three years, going from 2.4% to 2.9%. These rises coincide with the survey’s highest degree of uncertainty. In fact, the market is expecting inflation for the next 12 months since it began in April 2020.

Based on the statistics, older respondents (55-70) showed higher inflation perceptions and expectations compared to younger respondents (18-34), despite the fact that inflation forecasts usually vary with income groups. This may be attributed to the younger age group having less exposure to dealing with inflation and possibly having less disposable income to perceive the impact of price increases.

Nominal Income and Spending Growth

Consumers anticipated an increase in nominal income of 1.3% over the following year. The rates should go up from 1.2% in February in terms of both income and consumption. It increased for younger consumers aged 18 to 34. However, the expected nominal income growth decreased for older consumers aged 55 and over.

The growth rate of nominal spending over the last 12 months was projected to rise from 6.6% in February to 7.1%. On the other hand, the market forecasted an increase in nominal spending growth for the next 12 months from 3.9% to 4.1%. The changes in consumers’ perceptions and expectations regarding nominal spending were relatively uniform across different age and income groups.

In March, there was a slight decline in the economic growth expectations for the upcoming 12 months, from -0.9% to -1.0%, and an increase in the projected unemployment rate for the same period, rising from 11.5% in February to 11.7% in March. Furthermore, consumers still held onto the view that the future unemployment rate will surpass the present unemployment rate of 11.3%. The group with the highest anticipated and perceived unemployment rates were those belonging to the lowest income quintile.

Home Price Growth and Credit Access Expectations

In March, consumers had an average expectation that the price of their homes would increase by 2.7% over the next 12 months. This was higher than in recent months. Still, it was still significantly lower than the figures observed in the first half of 2022. The increase was primarily due to respondents with incomes below the median and those aged between 18 and 34 having higher expectations.

Meanwhile, mortgage interest rates expectations for the next 12 months continued to increase slightly to 5.1%, which was 1.8 percentage points higher than the expectations recorded at the beginning of 2022.

The perception of access to credit in the past 12 months and the expectations for access to credit in the next 12 months both tightened in comparison to February. This might be due to the growing uncertainty and prudence among consumers in the face of persistent inflation and economic worries.

In conclusion, the March 2023 Consumer Expectations Survey revealed mixed results in terms of inflation. Besides, it showcased income and consumption rates. Additional important components of the survey were: labor market and economic growth and housing and credit access. The rising inflation expectations coupled with declining economic growth expectations. An increasing unemployment rate expectations suggest that consumers are becoming more cautious in their spending and investment decisions. It will be interesting to see how these trends evolve in the coming months.

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