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Economists Survey Raises 2021 CPI Forecast To 4.9%

Repeats Story Initially Transmitted at 15:00 GMT Aug 14/11:00 EST Aug 14
--One-Year Ahead Inflation Expectation Steady at 2.5% in July
--Three-Year Ahead Inflation Expectations Down to 2.7% from 2.8%
--Household Income Growth Expectations Reach Survey Record
By Karen Mracek
     WASHINGTON (MNI) - Consumers' expectations for inflation held mostly steady
at the one-year ahead time horizons, albeit below the 12-month average, the New
York Federal Reserve Bank reported Monday, while the three-year ahead median
fell slightly. Still there is some good news for those looking for wage growth:
Consumer expectations about income and earnings are at or near record highs.
     The median expectation for inflation in the year ahead timeframe was 2.5%
in the July survey, same as in June, the New York Fed's Survey of Consumer
Expectations showed. While steady, it is still below the 2.7% average of the
past 12 months.
     The three-year-ahead median inflation expectation dropped slightly to 2.7%
in July from 2.8% in the June, and hovered right around the 12-month average.
     These figures won't likely give an solace to U.S. monetary policymakers
looking for evidence the weaker-than-expected inflation data earlier this year
was transitory and that upward inflation pressures are around the corner.
     In her June press conference, Fed Chair Janet Yellen acknowledged some
recent weakness in inflation expectations in surveys such as this one, as
opposed to market-determined expectations. But she quickly added: "Overall I
wouldn't say that we've seen a broad undermining of inflation expectations."
     While the inflation measures didn't move much, there was some positive
signs in this survey for wages. "Consumers' outlook for the labor market was
largely positive, with unemployment and earnings expectations improving," the
New York Fed said in the survey.
     In fact, household income growth expectations rose to a new high for the
survey which was started in June 2013. Median expected household income growth
increased 0.3 percentage points in July to 3.0%.
     Median one-year ahead expected earnings growth expectations also increased,
by 0.1 percentage point to 2.6% in July, its highest reading since March 2015.
     Wage growth has been a missing component of the labor market growth even as
the unemployment rate reached 4.3% in July, a level below what most economists
consider needed for longer-run stable maximum employment. In July, average
hourly earnings were up 0.3% monthly, and up just 2.5% year-over-year.
     Asked about the probability that the U.S. unemployment rate will be higher
one year from now, consumers saw a 36% chance it will be higher next year, the
New York Fed survey showed. That is well below the average probability seen
since the beginning of the survey.
     The mean perceived probability of losing one's job in the next 12 months
increased slightly to 13.7% in July. The mean probability of leaving one's job
voluntarily in the next 12 months increased for the second month in a row to
21.7%, up from 20.8% in June. 
     Meanwhile, the expected cost of food, medical, rent, college prices in 12
months were largely steady, while the expected cost of gasoline fell for the
third straight month, with consumers expecting a 3% rise in the July survey.
That's the lowest growth level expected since January 2016.
--MNI Washington Bureau;tel: +1 202 371-2121; email: karen.mracek@marketnews.com