MNI: NY Fed: Inflation Expect Rise For Both 1-Yr and 3-Yr

--Expected Earnings Growth Rose, But Income and Household Spending Fell

--Unemployment Rate Will be Higher 1-Yr From Now 33.5%; Low Since Dec 2014 

By Holly Stokes and Sara Haire

     WASHINGTON (MNI) - Consumers' expectations for 1-year and 3-year inflation

picked up modestly, to 2.8% and 2.9% respectively, reported the New York Fed's

Survey of Consumer Expectations on Tuesday morning. 

     This rise in expected inflation mirrors a continuingly tightening labor

market. The median year ahead earnings growth expectations continued its rise

since October, ticking up to 2.7%, as the perceived probability that

unemployment will be higher in a year dipped down to 33.5%. Both indicators

reached levels not seen since late 2014. 

     In line with the labor market tightening, the probability of both one

leaving their job voluntarily and involuntarily increased slightly to 21.7% and

13.8%, respectively. These levels are still below October's surge, but in line

and slightly above the trailing 12-months. 

     --MIXED HOUSEHOLD FINANCES

Despite expectations for earnings growing slightly, expectations for household

income and spending declined. However, the dip in household income to 2.9% was

not indicative of a change from the 2017 trend, but rather a reversion from

November's 3.6% spike. 

     Slight setbacks in expectations for household income did not drag down

expectation for financial situations to improve.

--POSITIVE OUTLOOK ON FISCAL

     Consumers were similarly optimistic towards government debt, with

expectations that it will be higher one year from now declining. This, combined

with modest declining expectations for tax changes, raises the question of to

what extent consumers expect tax reform to impact them. 

     Similarly, despite some political concerns that tax cuts would be fiscally

irresponsible, consumers do not seem to share this sentiment. As the debt

ceiling extension reaches the end of the continuing resolution on Friday,

consumers appear to be optimistic that politicians will reach a fiscally minded

agreement. Despite the decline, the prediction only lowered to 7.2% from the

highest point seen since November 2015 of 7.8%, still remaining well above the

trailing 12 months.

--MNI Washington Bureau; +1 212-800-8517; email: sara.haire@marketnews.com

[TOPICS: MMUFE$,M$U$$$]