July 12, 2021
WASHINGTON (Reuters) – U.S. consumers expect the economy to continue its rapid resurgence from the COVID-19 pandemic over the next year, with forecasts for inflation, earnings, income growth and spending all increasing in June, according to a monthly survey released on Monday by the New York Federal Reserve.
One-year-ahead median inflation expectations jumped for the eighth consecutive month to 4.8% in June, up from 4.0% in May and marking a new series high since the survey was launched in 2013. At the three-year outlook, they were unchanged at 3.6%.
The internet-based survey taps a rotating panel of 1,300 households and is a useful barometer for the U.S. central bank as it weighs its inflation outlook.
The Fed’s preferred inflation gauge has surged to the fastest annual pace since 1992 and is well above the central bank’s 2% target, but policymakers remain divided about how long the higher inflation readings will persist as supply bottlenecks caused by the pandemic begin to fade.
Consumers also have increasing confidence in the jobs market, the survey showed. The average expectation that the U.S. unemployment rate will be higher one year from now dropped to a series low of 30.7% in June, down from 31.9% in May. The perceived odds of losing a job over the next year also fell to a series low.
Median expected earnings growth over the year ahead edged up 0.1 percentage point to 2.6% in June, the highest reading since the beginning of the pandemic, and those surveyed reported they felt they had better odds of finding a job if they became unemployed. Those expected odds rose to 54.2% in June from 54.0% in May, although that was still well below pre-pandemic levels.
There were, however, tentative signs that the booming housing market may be reaching its peak, with consumers’ home price expectations remaining unchanged. That said, uncertainty about future home price growth rose to the highest levels ever.
(Reporting by Lindsay Dunsmuir; Editing by Paul Simao)