The outlook for household spending fell in April, the New York Fed says

  • A survey of consumer expectations for April showed the outlook for spending fell half a percentage point to an annual rate of 5.2%, the slowest since September 2021.
  • Respondents expect the inflation rate to be around 4.4% over the next 12 months, down half a percentage point from March.

People walk in front of a store on the Magnificent Mile shopping district in Chicago, Illinois on March 15, 2023.

Scott Olson | Good pictures

Housing spending is expected to fall significantly over the next year, according to a New York Federal Reserve survey released Monday, dampening consumer sentiment and reflecting a possible slowdown in inflation.

The central bank’s survey of consumer expectations for April showed the outlook for spending fell by half a percentage point to an annual rate of 5.2%, the slowest since September 2021.

This came with a 0.3 percent decline in the overall outlook for inflation next year. Respondents expect the inflation rate to be around 4.4% over the next 12 months, still ahead of the three-year outlook of 2.9% and the five-year outlook of 2.6%.

All of those levels are still above the central bank’s 2% inflation target, although they are moving toward the target.

The survey results come less than a week after the central bank approved a 10th consecutive interest rate hike from March 2022. This took the benchmark Fed funds rate to a target range of 5%-5.25%, the highest level since August 2007.

Along with the rate hike, central bank officials hinted that this month’s hike could be the last for a while as they assess the impact of previous monetary policy tightening.

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Consumers expect gas prices to rise 5.1% over the next year, a half-point increase from the March survey. Food prices are expected to rise 5.8%, a 0.1 percentage point decline from the previous month. The outlook for college spending fell sharply, falling to a 7.8% increase, down 1.1 percentage points from March.

The median outlook for earnings growth remained unchanged at 3%, although the employment outlook worsened. The probability that the unemployment rate will be high in one year has increased to 41.8%, an increase of 1.1 percentage points. The unemployment rate for April fell to 3.4% on Friday, the lowest level since May 1969.

Elsewhere in the survey, the one-year outlook for house price inflation rose to 2.5%, the highest since July 2022 and a 0.7 percentage point increase from March.

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