Spending, Inflation, Income Expectations: Consumers Expect No Improvement

A Fed study of consumer expectations projects a rise in spending but no overall economic improvement a year from now.

I produced the headline chart in Excel from a data download of the Fed's monthly Survey of Consumer Expectations.

Spending Projections

  • 75% Percentile: 8.13%
  • Median: 3.08%
  • 25% Percentile: 0.79%

The bottom wage earners barely expect to spend more a year from now. The top percentile fluctuates more, likely with sentiment towards the stock market.

The following charts are clipped straight from the report.

Inflation Expectations

Even looking three years ahead, consumers do not see a spike in inflation.

The short- and medium-term inflation expectations remain at 2.8 percent and 2.9 percent.

Earnings Expectations

Median one-year ahead earnings growth expectations declined slightly, from 2.7% in February to 2.6% in March. The decline was driven by respondents with annual income below $50,000.

Household Income Expecations

Household Income Expectations by Age

Median expected household income growth decreased 0.1 percentage points to 2.9% in March. The decrease was most pronounced among younger (less than 40 years old) and lower income (annual income below $50,000) respondents.

No Better Off

Median Income and spending expectations match median inflation expectations.

In short, consumers do not expect to be any better of next year than they are today.

Mike "Mish" Shedlock

Comments (5)
No. 1-5
Tony_CA
Tony_CA

They won't be any better off next year. The financial system is done.

Tengen
Tengen

Shouldn't be too much difference between this year and 2019, but there are two massive headwinds to consider further into the future:

1) How long can the Fed keep all the chainsaws in the air?
2) How much longer before our animosity-fueled society crosses into actual unrest?

I used to focus solely on #1, but after seeing steadily more signs of #2 I have learned to turn more attention in that direction. Today a lot of people who fail blame themselves and self-medicate with drugs and alcohol, but what if they shift blame outward? Could get ugly in a hurry. There are also a lot of people disillusioned with the US political process to consider. If they can't solve problems at the voting booth, they may try taking matters into their own hands.

klausmkl
klausmkl

The economy has been expanding now for 107 months. It will surpass the 120 month record. Yet doom and gloom consume.

Tengen
Tengen

Weren't you the guy railing on about how awful Millennials are in the other thread? So you seem to be arguing that our young people are hopeless yet everything is wonderful, at least from an economic outlook. The cognitive dissonance is strong in this one.

Our dopey American society is riddled with fault lines, both economic and social, whether you care to see them or not. Fed manipulation can only paper over our problems to a point.

gkaplan
gkaplan

These charts only make sense if they represent expected discretionary spending, right? I mean, who thinks they'll spend less on healthcare, rent and taxes a year from now?