January 2021 Consumers Expect Higher Spending And Home Prices Improvement

from the New York Fed

The Federal Reserve Bank of New York's Center for Microeconomic Data January 2021 Survey of Consumer Expectations, which shows that households' year-ahead spending growth expectations rose to 4.2%, the highest level recorded in more than 5 years. In contrast, earnings growth expectations have remained flat for the sixth consecutive month.

Labor market expectations continued to improve with higher expectations about job security and job finding. Home price expectations rose again in January to reach their highest level since May 2014. Median inflation expectations were flat at both the short and medium-term horizons, while inflation uncertainty and inflation disagreement remain elevated compared to pre-COVID-19.

The main findings from the January 2021 Survey are:


  • Median inflation expectations at the one-year and three-year horizons remained unchanged at 3.0% in January. Our measures of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) increased slightly at the one-year horizon and decreased slightly at the three-year horizon. Both measures of short and medium-term inflation disagreement remain elevated compared to their pre-COVID-19 levels.
  • Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes— at the short-term and the medium-term horizons remained unchanged in January. Both measures are substantially higher than they were before the outbreak of COVID-19.
  • Median year-ahead home price change expectations increased 0.4 percentage points to 4.0% in January, the highest reading since May 2014. The increase was driven mostly by respondents who live in the "West" Census region.
  • Expectations about changes in the price of commodities increased in January. The median one-year ahead expected change in the cost of gas and in the cost of rent increased the most, by 0.8 and 0.7 percentage points to 6.2% and 6.4%, respectively. The latter is the highest reading in 7 years. The median expected change in food prices, in the cost of medical care, and in the cost of a college education also increased by 0.4, 0.2, and 0.4 percentage points to 5.6%, 9.2%, and 5.6%, respectively.
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