Consumer Sentiment Survey Reveals Stable Inflation Expectations and Optimism in U.S. Market
The latest survey conducted by the New York Federal Reserve on consumer sentiment has highlighted some positive trends in the outlook of U.S. consumers. While inflation expectations remain stable, there is optimism surrounding household finances, credit access, and the stock market.
According to the survey, consumer expectations for inflation remain steady. Both one-year and five-year ahead expectations are holding firm at 3% and 2.5% respectively. However, there has been a slight decline in three-year ahead expectations from 2.6% to 2.4%.
The survey also indicated a downward adjustment in median year-ahead price change expectations for various categories. Gas prices are anticipated to rise by 4.2%, a decrease of 0.3 percentage points. Food prices are expected to increase by 4.9%, down by 0.1 percentage point. Rent prices are projected to grow by 6.4%, dropping 0.9 percentage points. Medical care costs are anticipated to increase by 8.6%, a reduction of 0.5 percentage points. The cost of college education is forecasted to grow by 5.9%, down by 0.4 percentage points. It is worth noting that gas prices are at their lowest point since December 2022, while expectations for food and rent prices are the lowest they have been since March 2020 and December 2020 respectively.
On the subject of household finances, the survey reveals an improvement in outlook. Expected household income growth has increased slightly to 3.1%, and spending growth expectation remains stable at 5%. The survey also highlights improved access to credit and a decrease in anticipated difficulty obtaining credit in the future. This reflects an easing of financial pressures for many consumers. The likelihood of failing to meet a minimum debt payment within the next three months has dropped to 12.1%, the lowest since before the pandemic outbreak. A sense of financial stability or improvement in the coming year has also risen, with 76.5% of respondents feeling confident. This is the highest level of optimism recorded since September 2021. Furthermore, there is a positive outlook for U.S. stock prices, with an increase of 0.8 percentage points to 37.5%.
While the survey portrays optimism in certain areas, the labor market shows mixed sentiments. Expected earnings growth for the next year has slightly increased to 2.8%, indicating a return to pre-pandemic levels of optimism. However, concerns about job security and market accessibility have intensified. The perceived probability of finding a job if one were to lose their current position has reached its lowest point since June 2021.
In other news, the S&P 500 Index, as tracked by the SPDR S&P 500 ETF Trust SPY, has reached record highs above $5,000.
Overall, the New York Federal Reserve’s survey depicts a resilient consumer sentiment, with stable inflation expectations and optimism in several areas. However, concerns about the labor market persist, highlighting the need for continued monitoring and support.
Analyst comment
Positive news. The market is expected to remain stable with steady inflation expectations. Optimism in household finances, credit access, and the stock market may contribute to increased consumer spending. However, concerns about job security and market accessibility could impact overall market sentiment.
