People walk past a store near the Magnificent Mile shopping district on March 15, 2023 in Chicago, Illinois.
Scott Olson | Getty Images
Household spending is expected to decline significantly next year, according to a New York Federal Reserve survey released Monday, reflecting a possible slowdown in consumer sentiment as well as inflation.
The central bank’s survey of consumer expectations for April showed the spending outlook fell half a percentage point to an annual rate of 5.2%, the lowest level since September 2021.
This coincided with a corresponding decline of 0.3 percentage points in the overall outlook for inflation in the following year. Respondents expect an inflation rate of around 4.4% over the next 12 months, still above the three-year outlook of 2.9% and the five-year outlook of 2.6%.
All of those levels are still above the Fed’s 2% inflation target, though they are moving closer to the target.
Survey results come in less than a week later Fed approves interest rate hike for 10th time in a row From March 2022. It took the benchmark fed funds rate to a target range of 5% to 5.25%, the highest level since August 2007.
Along with the rate hike, Fed officials indicated this month’s hike could be the last for some time as they assess the impact of all previous monetary policy tightening.
Consumers expect to see gas prices rise 5.1% next year, a half-point increase from the March survey. Food prices are forecast to increase by 5.8%, a decline of 0.1 percent from the previous month. The outlook for college costs dropped sharply, falling to an expected increase of 7.8%, which was 1.1 percentage points lower than in March.
The average outlook for earnings growth was unchanged at 3%, although the employment outlook deteriorated. The unemployment rate is likely to rise to 41.8% a year from now, an increase of 1.1 percentage points. The unemployment rate for April fell to 3.4% on FridayMay is tied at the lowest level since 1969.
Elsewhere in the survey, the one-year outlook for house price growth rose to 2.5%, the most since July 2022 and an increase of 0.7 percentage points from March.
