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SONIA Dove Strikes Again

--Three-Year Ahead Infl Expectations Increase; One-Year Ahead is Unchanged
--Expected Household Spending and Earnings Falls
--Labor Market Expectations Mixed as Earnings Fall But Ability to Find Job Rises
By Holly Stokes
     WASHINGTON (MNI) - Consumers are reported to have increased pessimism in
regards to expectations about earnings, spending, financial situations, and the
stock market, the NY Federal Reserve's Consumer Expectations survey released
Tuesday showed. 
     Consumers' one-year ahead inflation expectations remained unchanged at
2.5%, but increased from 2.6% to 2.8% for the three-year ahead. Further on 
inflation expectations, median home price change expectations fell to 3.0% - its
lowest since March 2016, and expectations for changes in the cost of college
dropped to 5.9% - just above the series low of 5.8% in May 2016. However,
one-year ahead gas price change expectations increased to 4.7%. 
     Confidence in earnings expectations dwindled, as the median one-year ahead
earnings growth expectations slipped from 2.5% to 2.3% - the second consecutive
drop since July. The median expectations for household income growth also fell,
from 2.7% to 2.2% - the lowest level since February 2014 and significantly down
from July's series high of 3.0%. Accordingly, the median household spending
growth expectations also dropped to 2.7% from 3.0%. All of these declines were
driven by younger and lower-educated respondents, which the survey defines as
under age 40 and with a high school degree or less. 
     The September survey also showed that less respondents felt they were
better off financially compared to a year ago, slipping from August's 32.6% to
32.3%. This pessimism in regards to financial situations also carried into
future expectations, with a decline from 42.3% to 40.3% of those surveyed
believing they will be better off financially a year from now.
     Consumers also showed lackluster confidence in other areas of household
finance. Expectations for US stock prices to be higher one year from now fell to
42.0%, and expectations for one year growth in government debt increased to 5.7%
- its highest since November 2016. Additionally, expectations that the average
interest rate on savings accounts would higher one year from new fell to 33.8%. 
     This pessimism also surfaced in respondent's attitude towards debt
repayment. The perceived probability of missing minimum debt payment over the
next three months increased for the third month in a row. 
     While survey responses showed a diminishing strength in expectations for
earnings and financial situation improvement, respondents were more mixed in
terms of employment prospects. 
     The mean perceived probability of losing one's job in the next 12 months
remained unchanged at 13.8%, while the probability of leaving voluntarily
slipped slightly to 20.6%. However, respondents showed increased confidence in
being able to find a new job, climbing to 59.2% - just below March 2017's series
high of 59.3%. 
     Despite rising confidence in the ability to find a new job, the mean
unemployment expectation, or "the probability that the U.S. unemployment rate
will be higher one year from now," slid up to 35.7%. These responses amidst
pessimistic earnings expectations, reflect uncertainty of the effect and
sustainability of a tightening labor market. 
--MNI Washington Bureau; +1 202-371-2121; email: holly.stokes@marketnews.com
[TOPICS: MMUFE$,M$U$$$]