EVERYTHING
CNBC reports that U.S. households are growing more worried about their financial situation, with indicators hitting levels not seen since 2022. The Federal Reserve Bank of New York’s monthly Survey of Consumer Expectations revealed a marked deterioration in the general perception of economic conditions, even as the inflation outlook remained largely unchanged.
Deteriorating Financial Outlook
The survey data showed that the percentage of respondents who felt their current financial situation was "much worse" than it was one year prior jumped to 13.3%. This figure represents an increase of about 2.7 percentage points from April and marks the highest level recorded since July 2022. Furthermore, when combining those seeing things as either much or somewhat worse, the total reached 43.7%, which the New York Fed noted was the highest percentage since January 2023.
The outlook for the coming year mirrored this pessimism. Only 22.9% of consumers expected their situations to improve, while a combined 36% anticipated conditions would be either much or somewhat worse. This negative net sentiment hit its lowest point since October 2022.
Inflation and Spending Expectations
Despite fears stemming from the Iran war regarding soaring energy prices, consumer worries about inflation remained virtually unchanged in the survey. Inflation expectations at the one-year horizon slightly declined to 3.5%. Longer-term outlooks held steady: the three-year expectation was 3.1%, and the five-year forecast stood at 3%.
However, specific price forecasts showed varied trends:
- Gasoline prices were expected to drop by 0.1 percentage point to 5%.
- Food costs rose by 0.6 percentage point to 5.8%.
- Rent was projected to increase significantly by 1.4 percentage points to 7.4%.
Additionally, expectations for household spending growth over the next year fell to 5%, a decrease of 0.4 percentage point from April. These figures come as the Federal Open Market Committee prepares its next interest rate decision on June 17. Markets are currently pricing in an expectation that the central bank will hike benchmark rates by a quarter percentage point by the end of the year, rather than implementing cuts.
Analysis
The confluence of rising financial anxiety and slowing spending expectations suggests that while consumers have not yet adjusted their inflation forecasts dramatically, underlying economic pressures are mounting. The persistent negative sentiment indicates that households are bracing for continued cost-of-living challenges despite minor shifts in price projections.