US consumers expect short-term inflation to rise at twice the rate of wage growth

FILE PHOTO: Federal Reserve building in Washington, DC
FILE PHOTO: The Federal Reserve Building is pictured in Washington, DC, U.S., August 22, 2018. REUTERS/Chris Wattie/File Photo

December 13, 2021

By Jonnelle Marte

(Reuters) – U.S. consumers’ short-term inflation expectations edged higher in November and expectations for future earnings growth softened, suggesting they expect price increases to outpace wages. at an even faster rate in the near term, according to a survey released Monday. of the New York Federal Reserve.

Prices for food and other goods are rising at their fastest pace since 1982, posing a political challenge to the administration of President Joe Biden and strengthening the market, according to Labor Department data released last week. Expect the Fed to raise interest rates next year.

Higher inflation, driven in part by pandemic-related supply chain disruptions and shifts in demand, is also eroding wage growth, and some consumers expect the situation to worsen in the near future. next time, according to a survey of the Fed in New York. While short-term inflation expectations rose, full-year earnings expectations fell in November.

Consumers said they expect inflation to average 6.0% in a year, up from an expectation of 5.7% in October. Expectations for earnings growth next year have softened. 2.8% in November from 3.0% the previous month.

That would cause inflation to grow 3.2 percentage points faster than earnings in a year, the biggest disparity since the survey launched in 2013.

However, the average three-year expectation of probable inflation fell to 4.0% from 4.2%, the first decline since June and only the second since October. 2020. And uncertainty about future levels of inflation also rose to new highs for the New York Fed survey.


Inflation is a central economic concern for US consumers, according to the latest Consumer Sentiment Index survey from the University of Michigan.

“When asked directly whether inflation or unemployment is the more serious problem facing the country, 76% chose inflation while only 21% chose unemployment,” said Richard Curtin, director survey, said in a statement Friday alongside the release of the latest reading. early December.

Fed officials, plagued by persistently high inflation and encouraged by a lower-than-expected unemployment rate, are likely to announce after their policy meeting this week that they plan to cut the program faster bond buying process to clear the way for interest rate hikes.

Some policymakers said they worry low interest rates could boost stock market prices, property values ​​and other asset prices.

The survey showed expectations for future home price growth fell slightly last month, but consumers still expect stronger growth than before the coronavirus pandemic. Consumers said they expect home prices to increase an average of 5% in a year, down from 5.6% in October but above the 3.1% expected in February 2020.

The monthly survey of consumer expectations is based on a rotating panel of approximately 1,300 households.

(Reporting by Jonnelle Marte; Editing by Paul Simao) US consumers expect short-term inflation to rise at twice the rate of wage growth

Bobby Allyn

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