Inflation Trends Remain Stable with Rising Cost Expectations
The Federal Reserve Bank of New York’s Center for Microeconomic Data released its February 2025 Survey of Consumer Expectations, revealing that inflation expectations have remained relatively stable in the medium and long term. While the one-year inflation forecast saw a slight rise of 0.1 percentage point to 3.1%, expectations for three-year and five-year inflation rates held steady at 3.0%. However, uncertainty about future inflation increased across all time horizons.
Consumer expectations regarding home prices remained within a narrow range, with median home price growth expectations rising to 3.3%. Commodity price expectations, however, saw significant increases, particularly for essentials such as gas, food, medical care, and rent. Gas price expectations climbed to their highest level since mid-2024, rising by 1.1 percentage points to 3.7%, while food price expectations increased by 0.5 percentage points to 5.1%. Similarly, the anticipated costs for medical care, college tuition, and rent saw notable jumps, reflecting growing concerns over affordability.
Labor Market Uncertainty and Wage Expectations
The NY Fed survey of consumer expectations highlighted shifting expectations within the labor market. While median earnings growth projections remained stable at 3.0%, concerns about rising unemployment grew significantly. The mean probability of an increased unemployment rate within the next year surged by 5.4 percentage points to 39.4%, the highest reading since late 2023. This sentiment was widespread across different demographics, including age, education, and income groups.
Meanwhile, the probability of voluntarily leaving a job within the next 12 months dropped by 2.3 percentage points to 17.6%, the lowest level since mid-2023. The likelihood of finding a new job after losing one’s current position also declined slightly, settling at 51.2%. These indicators suggest growing uncertainty in the labor market, with workers expressing increased caution about job mobility and economic stability.
Household Financial Concerns and Credit Constraints
The NY Fed survey of consumer expectations revealed that consumers’ outlook on their finances grew more pessimistic in February. The median expected household income growth edged up to 3.1%, continuing a trend of modest fluctuations. However, household spending expectations saw a more pronounced rise, climbing 0.6 percentage points to 5.0%. This increase was particularly noticeable among lower-income households and those with a high school education or less, suggesting that financial pressures are mounting for vulnerable groups.
Credit access emerged as a growing concern, with a larger share of households reporting greater difficulty in obtaining credit compared to a year ago. Expectations for future credit availability also deteriorated sharply, as the proportion of respondents anticipating tougher access to credit rose to 46.7% %—the highest level since mid-2024. Additionally, the probability of missing a minimum debt payment within the next three months increased to 14.6%, the highest since April 2020.
Consumers’ perceptions of their current financial situations remained largely unchanged, but their expectations for the future worsened notably. The share of households expecting their financial situation to decline in the next year rose to 27.4%, reaching its highest level since late 2023. Meanwhile, confidence in stock market performance weakened, with the perceived probability of higher stock prices in the next 12 months dropping to 37.0%.
The NY Fed survey of consumer expectations provides a snapshot of shifting consumer sentiments, highlighting a mix of stable inflation expectations, growing labor market uncertainty, and increased financial distress. As economic conditions evolve, these trends will be crucial in shaping both policy decisions and consumer behavior in the months ahead.
