US Consumer Sentiment Improves: In a fresh release from the Federal Reserve Bank of New York on Monday, a notable shift in consumer sentiment emerged, signaling growing optimism among US consumers. The October Survey of Consumer Expectations presented a more positive outlook compared to the preceding month, where concerns about debt payments mirrored early pandemic uncertainties.
Among the key takeaways, the perceived probability of missing a minimum debt payment dropped to 11.99% in October, aligning with figures from June and comfortably within pre-pandemic norms.
Consumer expectations regarding inflation exhibited a positive trend, with a 0.1 percentage point decline in anticipated inflation rates for one and five years ahead, settling at 3.6% and 2.7%, respectively. However, median inflation expectations over a three-year horizon remained steady at 3%, reaching a yearly peak.
The Federal Reserve keeps a close eye on consumer inflation expectations, recognizing their potential to shape economic outcomes. Recent concerns within the Fed revolve around the possibility of worsening expectations, as evidenced by the University of Michigan’s consumer survey, which indicated a dip in sentiment about the current economic state and a slight increase in long-term inflation expectations.
On the wage front, consumer expectations saw a marginal decline of 0.2 percentage points to 2.83%, staying within the 2.8% to 3% range observed since September 2021.
While there was a slight uptick in the mean perceived probability of job loss over the next year (12.7%), respondents expressed optimism about a lower national unemployment rate and improved job-finding prospects (56.6%).
Median expected growth in household income saw a modest increase to 3.1%, up from 2.7% in February 2020. Spending expectations, though tapering from the May 2022 peak of 9%, remained robust at 5.25%, well above the pre-pandemic level of 3.1%.
Overall, the survey revealed a positive shift in consumer sentiment, with more respondents noting improved household financial situations compared to the previous year. Looking ahead, opinions were divided for the year ahead, with an almost equal split between those expecting to be better off or worse off financially.
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