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Portfolio > Economy & Markets > Fixed Income

Consumer Views on Household Spending Growth Cool in April: NY Fed

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Consumers are expecting less of a household spending boost over the next year than they were a month ago, according to the Federal Reserve Bank of New York’s latest Survey of Consumer Expectations.

The April 2015 Survey of Consumer Expectations, released Monday, found that the median household spending growth expectations “retreated substantially” to the series low reached in February 2015 — despite that earnings and household income growth expectations went largely unchanged month-to-month.

Consumers said in April that they expected to spend 3.8% more in April 2016 — down from an expected 4.5% year-ahead increase in March.

“The decline in expected spending growth was widespread, but strongest among lower-income and lower-educated respondents,” the report states.

The 25th percentile of expected spending growth dropped to 0.8%.

Coming off a strong April jobs report showing U.S. unemployment at the lowest level since May 2008, Americans remain relatively confident in their earnings and household income growth potential, continuing March’s trend. After a marked decline in February, March’s expectations about home prices, earnings growth and household income returned to levels that prevailed during the second half of 2014, and those trends continued into April.

While the median year-ahead household income growth expectation decreased slightly to 2.8%, it remained close to the series’ high of 2.93% attained in March.

The median year-ahead earnings growth expectation also remained at the high end of the range since the series began in June 2013, despite decreasing marginally from 2.6% to 2.5% month over month.

According to the survey, “there was considerable heterogeneity across age groups, with the median earnings growth expectation increasing slightly for those under age 40, and falling for those older than 40.”

Consumers also expect lower short-term inflation, according to findings from the April 2015 Survey. The survey found that the median year-ahead expected rate of inflation fell from 2.9% to 2.7%, a new series low, while the median three-year ahead expected rate of inflation increased slightly from 2.9% to 3.0%.

The expectation for year-ahead house price inflation remained stable at 3.4%. According to the survey, the median expected house price inflation fell by 0.3 percentage points in the West and Midwest, while it increased by 0.5 and 0.2 percentage points in the South and Northeast, respectively.

Meanwhile, median expectations about year-ahead gasoline price changes declined by 0.3 percentage points to 5.7%, and food and rent inflation expectations increased slightly.

Each month, the Survey of Consumer Expectations interviews approximately 1,200 people who are part of a rolling panel, where each respondent participates in the survey for up to a year.

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