MNI POLICY:NY Fed Survey: Consumer Expectations Worsen in July

U.S. consumer views of job security deteriorated slightly in July after two months of gradual improvement as perceptions of job finding and financial situations for the year ahead halted in the New York Federal Reserve's latest consumer survey.

Consumer views of losing one's job in the next 12 months increased 1pp to 16.0% in June, above its 2019 average of 14.3% and its year-ago value of 13.8%, according to the survey.

And expectations that the U.S. unemployment rate will be higher one year from now started increasing again in July reaching 39.3% from 35.1% in June, after three consecutive months of decline since reaching a series high of 50.9% in March.

The mean probability of leaving one's job voluntarily in the next 12 months was steady in July at 18.9%, below its 2019 average of 21.0%. The mean perceived probability of finding a job, however, if one's current job was lost, slightly increased to 48.9% from 47.6% in June, remaining well below its average level in 2019 of 59.9%.

FINANCIAL SITUATION TO WORSEN

Consumers expectations about earnings remained steady as median expected household income stayed put at 2.1% in July for the second consecutive month, while is well below its 2019 average of 2.8%.

The internet-based survey with a rotating panel of 1,300 households also showed the average probability of missing a future minimum debt payment reached a new series low at 9.5% in July, down from 9.8% in June. However, the perceived probability of missing a minimum debt payment increased in July for those under age 40.

Expectations about households' financial situations for one year ahead deteriorated with more respondents expecting their financial situation to worsen and fewer expecting it to improve. Both perceptions and expectations of financial conditions remain weak compared to pre-coronavirus readings

INFLATION EXPECTATIONS

The survey of consumer expectations, one of the Fed's price gauges as it weighs interest rates policy, showed median inflation expectations at the one-year horizon increased to 2.9% from 2.7% in June, above its 12 month trailing average of 2.5%.

At the three-year horizon median inflation expectations similarly increased to 2.7% from 2.5%. At both time horizons the increase was driven by respondents below age 40.

Median inflation uncertainty, or the uncertainty expressed regarding future inflation outcomes, slightly increased at the one-year horizon, and remained steady at the three year horizon. Uncertainty at both horizons remains elevated relative to pre-coronavirus readings