Consumers’ Near-Term Inflation Concerns Remain Steady

Consumers have a stable short-term inflation outlook but a cautious view for the medium to long term.

While near-term inflation expectations are steady at 3.0%, there’s a slight increase in inflation concerns for three to five years ahead, according to the February 2024 Survey of Consumer Expectations released Monday (March 11) by the Federal Reserve Bank of New York’s Center for Microeconomic Data.

Those having a high school diploma or less are particularly worried when looking three years or five years ahead, the New York Fed said in a Monday press release.

The survey indicates decreased uncertainty about near-term inflation, according to the release.

Looking a year ahead, consumers expect prices increases to accelerate for gas; slow for medical care, college education and rent; and remain flat for food, the release said.

Employment prospects are met with a mix of optimism and concern, as anticipated earnings growth is slightly below the yearly average and job security worries grow, per the release. Respondents with annual household incomes of less than $50,000 were especially concerned about losing their job in the next year.

Although income growth outlook remains positive and spending growth expected to rise modestly, there are apprehensions about tighter credit access and financial stability, according to the release. The survey also delves into debt management, taxation and government debt, revealing broad concerns about fiscal health.

Meanwhile, views on savings and investment reflect a cautious optimism for higher savings rates but ambiguous feelings toward the stock market and personal financial situation, per the release.

“Perceptions about households’ current financial situations deteriorated somewhat with fewer respondents reporting being better off than a year ago,” the release said. “Year-ahead expectations also deteriorated marginally with a smaller share of respondents expecting to be better off and a slightly larger share of respondents expecting to be worse off a year from now.”

PYMNTS Intelligence has found that consumers who live paycheck to paycheck have been cutting back on nonessential items when grocery shopping.

Sixty-eight percent of paycheck-to-paycheck consumers who said they are already challenged paying their bills are saying “no” to nice-to-have items in favor of essential ones, as are 61% of consumers who live paycheck to paycheck but can comfortably manage their expenses, according to “Consumer Inflation Sentiment Report: Consumers Cut Back by Trading Down.”