Household expectations for spending growth fell sharply in December as near-term inflation expectations dipped, a consumer survey released Monday from the Federal Reserve Bank of New York showed.
The median expectation for household spending growth fell to 5.9 percent from 6.9 percent in November. Median one-year ahead inflation expectations declined by two-tenths of a percentage point to five percent, the lowest reading since July 2021.
Expectations for inflation three years ahead were unchanged at three percent. Median five-year-ahead inflation expectations increased by 0.1 percentage point to 2.4 percent.
Americans still believe that gas, grocery, and rent prices will climb in the year ahead but less so than in November. Gasa prices are expected to rise 4.1 percent and good prices by 7.6 percent, both seven-tenths of a percentage point lower than the November survey indicated. The expected increase for college education is a steep 9.2 percent, down two-tenths from November. Rent is expected to rise 9.6 percent, also down 0.2 percentage points from November.. The median expected change in the cost of medical care, on the other hand, rose by 0.1 percentage point to 9.7 percent.
Median one-year-ahead expected earnings growth rose by 0.2 percentage point to 3.0 percent in December. The increase was most pronounced for respondents over the age of 60 and those with a high-school education or less, according to the New York Fed. The growth in earnings expectations will likely increase worries of Fed officials that a tight labor market could keep inflation high.
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