Global Courant 2023-05-08 21:43:56
People walk in front of a store along the Magnificent Mile shopping district on March 15, 2023 in Chicago, Illinois.
Scott Olson | Getty Images
Household spending is expected to fall significantly over the coming year, according to a New York Federal Reserve survey released Monday that reflects depressed consumer confidence as well as a potential slowdown in inflation.
The central bank’s Survey of Consumer Expectations from April showed that the outlook for spending fell by half a percentage point to an annualized rate of 5.2%, the lowest level since September 2021.
This was accompanied by a corresponding drop of 0.3 percentage point in the headline inflation outlook for the next year. Respondents expect inflation to be around 4.4% over the next 12 months, still well above the three-year forecast of 2.9% and the five-year forecast of 2.6%.
All of these levels are still above the Fed’s 2% inflation target, although they are getting closer to the target.
The survey results come less than a week after the Fed approved its 10th consecutive rate hike since March 2022. That pushed the benchmark Fed Funds rate to a target range of 5% to 5.25%, the highest level since August 2007.
Along with the rate hike, Fed officials hinted that this month’s hike could be the last for a while as they assess the impact of all previous monetary policy tightening.
Consumers expect gas prices to rise 5.1% in the coming year, up half a point from the March survey. Food prices are expected to rise by 5.8%, down 0.1 percentage point from the previous month. The outlook for college costs fell sharply, falling to an expected 7.8% increase, which was 1.1 percentage points lower than in March.
The median outlook for earnings growth remained unchanged at 3%, although the employment outlook deteriorated. The probability that the unemployment rate will be higher one year from now rose to 41.8%, an increase of 1.1 percentage points. The unemployment rate for April fell to 3.4% on Friday, the lowest level since May 1969.
Elsewhere in the survey, the one-year outlook for house price growth rose to 2.5%, the highest since July 2022 and up 0.7 percentage points from March.
