Americans anticipate income growth to slow and inflation to stay elevated in the Federal Reserve Bank of New Yorks survey of consumer expectations.
Median expected growth in household income declined 1.3 percentage point to 3.3% in the January survey, the largest monthly drop in data going back almost ten years, the New York Fed in a report Monday. Views on inflation one year ahead were unchanged at 5%.
Expectations for income growth remain higher than their pre-pandemic levels. Still, increasing budget strain is showing in the results, with the average perceived probability of missing a minimum debt payment over the next three months ticking up in January.
Households were mixed about where inflation might head in the longer run. Inflation expectations softened to 2.7% three years ahead, but increased at the five-year-ahead horizon to 2.5%.
Consumers also anticipate steeper gains in gasoline and food prices than in December.
As the real estate market cooled amid higher interest rates, so have expectations for home prices.
A quarter of the respondents anticipate housing prices to drop by 3% over the next year matching a record decline set in April 2020, the month after Covid-19 was declared a pandemic. And for the first time since the monthly survey was started in June 2013, respondents with income of $100,000 or more expect home prices to fall in the coming year.
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