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American Consumers Expect Inflation Uptick to Continue for Next Three Years

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American inflation expectations for the year ahead were unchanged in July, but forecasts for the next three years hit a seven-year high.

Source: Federal Reserve Bank of New York

Consumer expectations of inflation for the coming year were unchanged at 4.8%. Expectations at the three-year horizon increased to 3.7%, the highest reading since August 2013.

Consumer uncertainty on inflation decreased for both the short-term and medium-term horizons, but both remained above the levels seen before the COVID-19 pandemic hit.

Earnings growth expectations hit 2.9% in July to mark its fourth straight increase and a fresh record high. Optimism was driven by respondents with no more than a high school degree and incomes under $50,000.

Expectations that the unemployment rate will grow a year from now increased to 31.7%, even as the perceived probability of losing one’s job increased to 12.2%.

Household incomes are expected to grow 2.9%, slightly down from previously but still remain above levels seen in late 2018 and early 2019.

 

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