Modest Improvement In Consumer Expectations

Consumers Slightly More Confident In The Economy

Keith Griffin

June 8, 2020

New York Federal Reserve Bank

Consumers are beginning to be more confident in the economy – slightly. There are small indications of a belief things are going to get better.

The Federal Reserve Bank of New York’s Center for Microeconomic Data released the May 2020 Survey of Consumer Expectations, which shows small signs of improvement in households’ expectations compared to April. Consumers grew comparatively more optimistic about labor market outcomes with earnings growth, job finding, and job loss expectations all slightly improving, but remaining far off pre-COVID19 levels.

Expected income and spending growth as well as the probability of missing a future minimum debt payment also displayed improvements. On the other hand, perceived and expected availability of credit continued to worsen. Median inflation expectations increased at the one-year horizon and remained stable at the three-year horizon.

The main findings from the May 2020 Survey, which is nationwide, are:


  • Median inflation expectations at the one-year horizon increased by 0.4 percentage point to 3% in May, while median three-year ahead inflation expectations remained unchanged at 2.6%.
  • Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—increased at the one-year horizon, to a new series’ high.
  • Median home price change expectations recovered slightly from its series’ low of 0% reached in April to 0.6% in May. The slight increase was driven by respondents who live in the West and Northeast Census regions.

Labor Market

  • Median one-year ahead expected earnings growth increased from 1.8% in April to 2.0% in May, remaining below the 12-month trailing average of 2.3%. The increase was driven by lower-income respondents (below $50,000) and those without a college education.
  • Mean unemployment expectations—or the mean probability that the U.S. unemployment rate one year from now will be higher than its current very high level—displayed a significant decline to 38.9% in May, from 47.6% in April and 50.9% in March. This decline was broad-based across age, education, and income groups.
  • The mean perceived probability of losing one’s job in the next 12 months declined from 20.9% in April to 18.7% in May but remained well above its 12-month trailing average of 15.2%. The mean probability of leaving one’s job voluntarily in the next 12 months increased from 17.3% in April to 19.1% in May. The increase was largest for respondents without a college degree.

Household Finance

  • Median year-ahead household income growth expectations increased from 1.9% in April to 2.1% in May, after declining for three consecutive months. However, the median remains considerably below its year-ago level of 2.8% and a quarter of respondents expect a decrease of at least 0.3% in their household incomes over the next 12 months.
  • Perceptions about households’ current financial situations compared to a year ago and one-year ahead expectations about households’ financial situations both improved slightly but remain relatively depressed.
  • The average perceived probability of missing a minimum debt payment over the next three months declined sharply from 16.2% to 12.6% in May, just above its 12-month trailing average of 12.3%. The decline was broad-based across age, education, and income groups.
About the Survey

The Survey of Consumer Expectations contains information about how consumers expect overall inflation and prices for food, gas, housing, and education to behave. It also provides insight into Americans’ views about job prospects and earnings growth and their expectations about future spending and access to credit. The SCE also provides measures of uncertainty regarding consumers’ outlooks. Expectations are also available by age, geography, income, education, and numeracy.

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