November 2018 Consumer Expectations: Inflation Outlook Is Steady Despite Falling Home Price Growth Expectations

from the New York Fed

December 2018 Survey of Consumer Expectations, which shows no change in short-term inflation expectations and a slight uptick in medium-term inflation expectations. Expectations that the unemployment rate will be higher increased for the third consecutive month, while expectations about income and spending growth remained stable.

Home price growth expectations continued their downward trend. Gas price growth expectations retreated for the second month in a row, and expectations about stock prices worsened.

(Click on image to enlarge)

The main findings from the December 2018 Survey are:


  • Median inflation expectations at the one-year horizon remained unchanged at 3.0%, while they increased by 0.1 percentage points at the three-year horizon to 3.0% in December, returning to October reading. Inflation uncertainty-or the uncertainty expressed by respondents regarding future inflation outcomes-also remained unchanged.
  • Median home price change expectations declined again in December to 3.0%, its sixth consecutive decline since June.
  • The median one-year ahead expected gasoline price change saw its second consecutive large drop, declining from 4.5% in October to 3.7% in December, its lowest level since July 2017. In contrast, the median one-year ahead expected price change for food, medical care, and rent changed little in December, staying within 0.1 percentage points relative to the previous month's expectations. The reading for the median one-year ahead expected food price change is the lowest since the start of the series.
  • The median one-year head expected price change for college education decreased from 6.3% in November to 5.9% in December, remaining well below its 12-month trailing average of 6.8%.

Labor Market

  • Median one-year-ahead earnings growth expectations rebounded from 2.0% in November to 2.5% in December, back to its October reading. The increase was most pronounced among respondents without a college degree.
  • Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—increased for the third consecutive month from 35.8% in November to 38.8% in December, reaching the series' high since October 2016. The increase was broad-based across age, education, and income groups.
  • The mean perceived probability of losing one's job in the next 12 months fell from 14.7% in November to 13.8%. The mean probability of leaving one's job voluntarily in the next 12 months also decreased from 22.8% in November to 21.1%.
  • The mean perceived probability of finding a job (if one's current job was lost) increased from 58.6% in November to 58.8%, remaining within its narrow 57.1-60.0 range for the past year.
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