According to the Federal Reserve Bank of New York’s July Survey of Consumer Expectations, American consumers are feeling less gloomy about the U.S. economy. The survey, which interviewed 1,300 heads of households, provides insights into how Americans perceive the economy, from their job prospects to their expectations of the cost of living.
Positive Outlook on Personal Finances
The report reveals that more respondents reported being better off than a year ago, while fewer respondents reported being worse off. Additionally, expectations of rising inflation decreased in the near-term, medium-term, and long-term. Furthermore, respondents’ year-ahead expectations showed improvement, with fewer expecting to be worse off a year from now and more anticipating being better off. Notably, the share of people expecting to be better off a year from now reached its highest level since September 2021.
Decreasing Inflation Expectations
The survey also highlights a decrease in median inflation expectations. In July, the median expectation fell to 3.5% from the previous month’s 3.8%, marking the lowest reading since April 2021. It’s worth mentioning that the annual rate of inflation rose to 3.2% in July, up from 3% in the prior month.
Moderating Home-Price Growth and Expected Cost Reductions
Consumers’ projections for home-price growth indicate a slight slowdown. In July, they expect a growth rate of 2.8%, compared to 2.9% in June. Moreover, respondents anticipate decreases in the cost of gas, food, medical care, college expenses, and rent in the year ahead.
Overall, this survey’s findings demonstrate a more positive sentiment among American consumers regarding their personal finances, inflation expectations, and key cost factors such as home prices and living expenses.
According to recent data, expectations for food inflation have reached their lowest level since September 2020, standing at 5.2%. Similarly, medical-care inflation is also at its lowest since November 2020, currently recorded at 8.4%. Additionally, expectations for rent increases have dropped to their lowest point since January 2021, resting at 9%.
Confidence among individuals has increased in July when compared to June, particularly in relation to household spending growth and timely repayment of minimum debt payments. Moreover, people are anticipating an increase in the average interest rate on their savings accounts. Furthermore, there is a prevailing belief that U.S. stock prices will experience an upward trend over the next 12 months.
However, individuals are less optimistic about wage growth. The median expected earnings growth for the upcoming year has decreased from 3% to 2.8%, as reported by the Fed.
Fortunately, there has not been a significant rise in concerns regarding job security. In fact, the perceived possibility of losing one’s job within the next year has declined from 12.9% in June to 11.8% in July. Additionally, the probability of leaving one’s job voluntarily over the next 12 months has also decreased to 17% from 18.9%, marking the lowest reading since March 2021.
Interestingly, the perceived probability of finding a new job, if one were to lose their current position, has slightly increased to 55.8% in July from 55.3% in June.