By Nathalie Voit

Consumers’ outlook on inflation slowly improved in the short-run but showed no signs of abating on a long-term basis, the Federal Reserve Bank of New York said in its monthly Survey of Consumer Expectations.

Median one-year ahead inflation expectations fell in April to 6.3% from 6.6% in March. In contrast, median inflation expectations at the three-year horizon slightly increased by 0.2 percentage points to 3.9%. The Fed noted both metrics are 0.3 percentage points below their series highs, although they remain elevated.

Home price expectations held steady at 6.0%, well above their pre-pandemic levels. Respondents anticipate home prices in the “South” Census region of the country to accelerate at the fastest pace.

Consumers anticipate a significant increase in household spending heading into the year—the Survey projects year-ahead household spending to rise to 8.0% from 7.7% in March.

Spending on the cost of a college education and rent is also projected to increase. According to the New York Fed survey, consumer expectations for the cost of a college degree and rent rose by 0.6 percentage points to 9.1% and 0.1 percentage points to 10.3%. The median expected increase in rent is now at a new record high, its worst reading since the survey began in 2013.

On a more positive note, consumers expect gas prices to increase more slowly over the near term. The expected change in gas prices one year from now fell sharply by 4.4 percentage points to 5.2%. Consumer expectations for the cost of food and medical care 12 months from now also subsided to 9.4% and 9.5%.

Participants also expressed optimism about their labor market prospects. Earnings growth expectations at the one-year horizon remain strong at its series high of 3.0% in April. The mean perceived probability of losing one’s employment in the next 12 months also decreased to an all-time low of 10.8%.

The New York Fed survey was published just days before the Labor Department released data for April consumer prices. According to the report, consumer prices in April spiked 8.3% over the last 12 months. The all-items index was slightly down from the previous month’s 8.5% 12-month inflation reading.