By Joseph Chalfant
According to a survey conducted by the Federal Bank Reserve of New York, consumers’ expectations for inflation are at an eight-year high.
The New York Fed Survey of Consumer Expectations provides insight into how American households feel about spending, income growth, job prospects, inflation, and credit access. 1,300 households are surveyed for a rotating 12-month period.
The May edition of the survey found that the median one-year ahead expectation for inflation is up from 3.4% to 4% since April. Median three-year ahead expectations grew slightly slower, from 3.1% to 3.6% since last month. Concerns over inflation growth are highest among those 60 and older and those with a high school diploma or lower.
This marks the highest levels since August of 2013, the New York Fed noted in a press release.
The survey also found that uncertainty over future inflation outcomes is rising. Median one-year ahead uncertainty grew from 3.6% to 4% over last month, and median three-year ahead uncertainty went from 3.1% to 3.6% since April.
Expectations for home prices, food, gas, and college education have all increased as well, the survey found. The one-year ahead expected changes for rent and food prices are at highs of 9.7% and 8%. Gas expectations have risen to 9.8%, and college education has increased to 6.1%.
While the survey found that concerns over inflation have swelled, it also found that fears over the labor market are cooling and spending is increasing.
Earnings growth expectations are near pre-pandemic levels, up from 2.1% to 2.5% since April. Fears over unemployment increase have fallen from 34.6% to 31.9%. The mean perceived job loss probability has also decreased from 15% to 12.6%. Expected household spending growth has reached a high of 5.0%, increasing 0.4% from last month.
Some experts believe that inflation fears could be tied to the reopening economy.
“It’s easy to forget the fact [that] a year ago, the cost of a barrel of oil was actually in negative territory. When the world shut down in March or April, the price of a barrel of oil dropped to the floor. As demand for everything from cars to airfare, to cruise lines picks up, the price … for a barrel has spiked,” said Matt Roling, a Finance professor at Wayne State University, in an interview with WXYZ Detroit. “As the economy begins to reopen, we see the supply of things like homes, cars, lumber, airfare get squeezed as supply races to catch up with demand.”
