January 2020 Consumer Expectations: Inflation Expectations Hold Steady As Year Opens

from the New York Fed

The January 2020 Survey of Consumer Expectations, which shows no change in the short- and medium-term inflation expectations. The expected change in the cost of medical care declined to a new series' low.

Consumers remain optimistic about labor market outcomes with year-ahead earnings growth, job finding, and job loss expectations all improving. The average expectation of an increase in U.S. stock prices continued on its upward trend.

The main findings from the January 2020 Survey are:

Inflation

  • Median inflation expectations at both the one-year and three-year horizons were unchanged at 2.5% in January.
  • Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—decreased slightly both at the one-year and three-year horizons.
  • Median home price change expectations were unchanged at 3.0%, the third consecutive reading at this level. The reading is also similar to the levels observed throughout most of 2019.
  • The median one-year ahead expected change in the price of gasoline remained unchanged at its lowest level since July 2017. On the other hand, expectations for changes in the cost of a college education, medical care, and rent all fell in January. Notably, the measure for the expected change in the cost medical care reached a new series' low at 5.7%.

Labor Market

  • Median one-year ahead expected earnings growth increased to 2.6% in January, from 2.2% in December. The reading is above the 12-month trailing average of 2.4%. The increase was broad-based across age and income groups.
  • Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—increased slightly to 34.8% in January, from 34.6% in December.
  • The mean perceived probability of losing one's job in the next 12 months declined 0.7 percentage point to 14.7% in January. The decline was driven by respondents with household incomes more than $100,000 and those over the age of 40. The mean probability of leaving one's job voluntarily in the next 12 months increased from 20.9% in December to 21.2% in January. The increase was most pronounced among respondents with a high school degree or less and those below the age 40.
  • The mean perceived probability of finding a job (if one's current job was lost) increased from 58.8% in December to 59.8% in January, remaining only marginally below the 12-month trailing average of 59.9%.
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