Home » Outlook for Household Spending Slumped in April, New York Fed Survey Shows

Outlook for Household Spending Slumped in April, New York Fed Survey Shows

Household spending is expected to decrease significantly over the next year, according to a New York Federal Reserve survey released Monday that reflects downbeat consumer sentiment as well as a potential slowdown for inflation.

The central bank Survey of Consumer Expectations for April showed that the outlook for spending fell by half a percentage point to an annual rate of 5.2%, the lowest level since September 2021.

That came with a corresponding decline of 0.3 percentage point in the overall outlook for inflation over the next year. Respondents expect an inflation rate of about 4.4% in the next 12 months, still well above the three-year outlook for 2.9% and the five-year view of 2.6%.

All of those levels are still above the Fed’s 2% inflation target, though they are drifting closer to the goal.

The survey’s results come less than a week after the Fed approved its 10th consecutive interest rate hike since March 2022. That 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 hinted that this month’s increase could be the last for a while as they assess the impact of all the preceding monetary policy tightening.

Consumers expect to see gas prices climb by 5.1% over the next year, a half-point increase from the March survey. Food prices are projected to rise by 5.8%, a 0.1 percentage point decline from the previous month. The outlook for college costs dropped sharply, falling to an expected increase of 7.8% that was 1.1 percentage points lower than March.

The median outlook for earnings growth was unchanged at 3%, though the employment outlook worsened. The likelihood that the unemployment rate will be higher a year from now increased to 41.8%, a 1.1 percentage point increase. The jobless rate for April fell Friday to 3.4%, tied for the lowest since May 1969.

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

Source : CNBC