US consumers expect slightly higher inflation in the near term and are growing more pessimistic about their finances, according to a monthly survey from the Federal Reserve Bank of New York.
Median expectations for year-ahead inflation rose slightly in February to 3.1%, from 3% in January, the New York Fed’s Survey of Consumer Expectations showed. Consumers’ outlook for inflation three and five years out held steady at 3%, potentially offering reassurance for policymakers with a close eye on such forecasts.
Inflation expectations are particularly important as President Donald Trump’s policies, including a crackdown on immigration and tariffs against America’s largest trading partners, threaten to slow growth and add to stubborn price pressures. Officials have said they might be able to “look through” any price increases caused by the tariffs if consumers’ long-term inflation expectations remain stable.
The report showed Americans now see faster price growth for gas, food, medical care and rent. Consumers are also growing more cautious and uneasy about the economy.
“Households expressed more pessimism about their year-ahead financial situations in February, while unemployment, delinquency and credit access expectations deteriorated notably,” the New York Fed wrote in a statement.
The share of respondents who think their year-ahead financial situation will be somewhat or much worse off jumped to 27.4%, reaching the highest level in 15 months. And Americans’ perceived chance of missing a minimum debt payment in the next three months rose to an average of 14.6%, the most since April 2020.
Job Prospects
Workers were also more downbeat about their job prospects. The average probability of quitting a job in the next year — typically a sign of how confident consumers are in the labor market — fell to 17.6%, the lowest level since July 2023. The odds of finding a job in three months after becoming unemployed also declined, remaining below its 12-month average.
The probability that the unemployment rate would be higher one year from now climbed to 39.4%, the highest since September 2023. The increase was broad-based across age, education, and income groups.
Aside from the job market, the report showed consumers dimmed their outlook for the stock market. The expected probability that stock prices will be higher in a year fell to the lowest since December 2023.
Written by: Jonnelle Marte and Alexandre Tanzi — With assistance from Maria Eloisa Capurro @Bloomberg
The post “US Consumers’ Pessimism Grows, Long-Run Inflation Outlook Stable” first appeared on Bloomberg