MNI: NY FED: Consumers Optimistic For Future Finances

By Holly Stokes

     WASHINGTON (MNI) - Consumers continue to hold optimistic outlooks in

regards to their year-ahead financial situations, as inflation expectations

remain relatively stable and the job outlook dampened slightly, the New York

Federal Reserve Bank reported Monday in their October Survey of Consumer

Expectations.

     Asked of their expectations for their household's financial situations one

year from now, 40.9% of the roughly 1,300 household heads said they expect to be

better off financially, up from September's 40.3%. The proportion of those who

expect to be financially worse off in a year's time is approaching a series low.

     This optimism has also translated into a 2.6% rebound in the median

expectations for household income growth after September's sharp decline, as

well as increased expectations for U.S. stock prices to be higher one year from

now. As consumers continue to expect gains in income and financial well-being,

the median expectation for household spending growth has also ticked up to 2.8%

from September's 2.7%, but remains below the 12 month trailing average of 3.1%.

The New York Fed notes that the gain in household spending was driven by

lower-educated (high school or less) and lower income (below $100,000)

respondents. 

     Despite growing expectations for changes in household income and spending,

inflation outlooks remain relatively stable. The median inflation expectation at

the one-year horizon ticked up 0.1pp to 2.6% in October, while the median

inflation expectation at the three-year horizon remained unchanged at 2.8%.

However, the median inflation uncertainty, or the respondents' uncertainty on

future inflation, increased on both one and three year horizons. 

     While inflation expectations rose slightly for medical care and the cost of

college, expectations for gas and food prices declined - with food prices

declining to 4.3%, a new series low since the survey's start in June 2013. 

     Amidst growing expectations for improvement in financial situations and

ubiquitous reports of a tightening labor market, consumers' outlook on the job

market is actually declining slightly. The median one year ahead earnings growth

expectation dipped to 2.1%, the third consecutive decline. Households also have

slightly higher expectations for the unemployment rate to be higher one year

from now than they did in September, increasing from 35.7% to 36.0%. 

     Even as firms report increased difficulty to fill open positions, the mean

perceived probability of losing one's job in the next 12 months rose to 15.3%,

as the mean perceived probability of finding a job decreased from 59.2% to

57.7%. However, expectations for finding a job remained above the past year's

average of 56.8%. 

     Though higher expectations for losing one's job seem to contradict a

tightening labor market, the survey does show that the probability of leaving

one's job voluntarily in the next 12 months (presumably to pursue another

opportunity) increased to 23.1%. This increase was driven by those without

college degrees and incomes below $100,000. 

     The October survey also highlighted consumers' expectations for  fiscal

policy, suggesting some possible consumer concerns. The median expectation for

one-year growth in taxes rose slightly to 2.3%, still close but above the series

low of 2.1% in February. The median year ahead expectation for growth in

government debt also rose, for the third consecutive month, to 5.9% - a level

which has not been seen since a year ago.

--MNI Washington Bureau; +1 202-371-2121; email: holly.stokes@marketnews.com

[TOPICS: M$U$$$]