- Consumers expect their household spending to grow by 3.7 percent in the next year, according to a Federal Reserve Bank of New York report, hitting its highest point since 2016
- Significant disagreements and uncertainty among respondents over short- and medium-term inflation
- Anticipation of higher spending comes amid continuing flat expectations on income growth, with more respondents expressing pessimism about their financial situation
Consumers expect their spending to increase by the highest level in four years over the next 12 months, according to a recent report by the Federal Reserve Bank of New York. Expectations on household income remained flat, with more people expressing pessimism about their personal financial situation.
In its Survey of Consumer Expectations for November, respondents said they anticipate their spending will grow by 3.7 percent over the next year. This was up from 3.1 percent in October, reaching its highest point since July 2016. Households with annual incomes under $50,000 drove much of the increase.
The report showed considerable variance and uncertainty in inflation expectations, although the median respondent said they think inflation will grow by 3 percent in the year ahead. The three-year inflation expectation stood at 2.8 percent.
The anticipated year-ahead growth in costs for goods and services slowed in several areas, though respondents still expect to pay a considerably higher price a year from now. The median respondent expected increases of 7.1 percent for medical care, 5.5 percent for rent, 5.2 percent for gasoline, 5.2 percent for college education, and 5.1 percent for food.
The median expectation for taxes for the year ahead was a 4.1 percent increase. This was up from 2.9 percent in the previous month to its highest reading since May 2014.
November marked the fifth consecutive month where earnings expectations held flat, with a median expectation of 2 percent growth over the next year. The median expectation for household income growth also held flat at 2.1 percent, below the 2019 average of 2.9 percent.
While there were improved expectations on job security, respondents were more likely to expect that the unemployment rate in the United States will increase in the next 12 months. While more than half of respondents said they do not expect their personal financial situation to change one year from now, 18.3 percent said they think it will be worse – up from 15.5 percent in October. Twenty-nine percent said they think their personal financial situation will get better, down from 30.1 percent in October.
