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Consumer Inflation Expectations Hold Steady, Credit And Stock Market Outlooks Improve: New York Fed

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The latest New York Federal Reserve survey on consumer sentiment reveals that inflation expectations remain broadly stable, while expectations for household finances, credit access and the stock market show signs of optimism among U.S. consumers.

January’s findings from the NY Fed survey indicate a steady consumer outlook on inflation, with one-year and five-year ahead expectations holding firm at 3% and 2.5%, respectively. A slight decline was reported in three-year ahead expectations from 2.6% to 2.4%.

The survey revealed a downward adjustment in median year-ahead price change expectations for key categories: gas prices are anticipated to rise by 4.2%, a decrease of 0.3 percentage points; food prices by 4.9%, down by 0.1 percentage point; rent by 6.4%, dropping 0.9 percentage points; medical care costs are expected to increase by 8.6%, a reduction of 0.5 percentage points; and the cost of college education is forecasted to grow by 5.9%, down by 0.4 percentage points.

Significantly, the expected increase in gas prices hit its lowest point since December 2022, while expectations for food and rent prices have not been this low since March 2020 and December 2020, respectively.

Perceptions Of Credit Access Improve, Consumers Bullish On US Stocks

Household financial outlooks have improved, with a slight increase in expected household income growth to 3.1% and a stable spending growth expectation at 5%.

The survey also highlights an improved access to credit and a decrease in the anticipated difficulty of obtaining credit in the future, reflecting an easing of financial pressures for many consumers.

The likelihood of failing to meet a minimum debt payment within the next three months dropped to 12.1%, a decrease of 0.3 percentage points, reaching levels last seen prior to the pandemic outbreak.

Optimism about financial stability or improvement in the coming year rose, with 76.5% of respondents feeling confident, the highest optimism recorded since September 2021.

Additionally, the expectation that U.S. stock prices will rise over the next 12 months has grown by 0.8 percentage points to 37.5%, marking the most positive outlook since April 2022.

The S&P 500 Index, as tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY), has reached fresh record highs above $5,000.

Mixed Sentiment On The…

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