Benzinga - by Piero Cingari, Benzinga Staff Writer.
The Federal Reserve Bank of New York’s December 2023 Survey of Consumer Expectations unveiled a marked decline in consumer inflation expectations across all observed horizons and varied sentiments across different economic indicators.
Notably, year-ahead inflation expectations fell to the lowest levels recorded since January 2021.
Key Highlights:
- Inflation Expectations: The median inflation expectations at the one-year-ahead horizon dipped from 3.4% to 3.0%, the lowest in nearly two years. Over three years, this expectation fell from 3.0% to 2.6%, and over five years, it declined from 2.7% to 2.5%.
- Earnings and Spending Growth: Median one-year-ahead expected earnings growth is now at 2.5%, the lowest since April 2021. This is primarily influenced by respondents with a high school diploma or less. Additionally, expectations for earnings growth and spending growth have slightly decreased.
- Sector-Specific Price Change Expectations:
- College Education Costs: Increased by 0.5 percentage points to 6.3%.
- Food Costs: Decreased by 0.3 percentage points to 5.0%.
- Rent Costs: Decreased by 0.7 percentage points to 7.3%.
- Gas and Medical Care Costs: Remained unchanged at 4.5% and 9.1%, respectively.
- Job Market Outlook: The mean perceived probability of losing one's job in the next year has marginally decreased to 13.4%. Concurrently, there’s a slight increase in the probability of voluntarily leaving a job, up to 20.4%, along with a marginal rise from 55.2% to 55.9% in the perceived chances of finding a new job if the current one is lost.
- Household Income and Financial Situations: The median expected growth in household income slightly decreased to 3.0%. However, this remained above the pre-COVID-19 pandemic level of 2.7%. Notably, perceptions regarding households’ current financial situations have improved, with fewer respondents feeling worse off than a year ago.
- Interest Rates and Stock Market Expectations: The probability of an interest-rate increase in the next 12 months fell to 25.9%, the lowest since November 2021. There was a marginal increase in the expectation of higher stock prices in the next 12 months, to 36.7%.
Market Reactions
As of 11:20 a.m. in New York, the SPDR S&P 500 ETF Trust (NYSE:SPY) experienced an uptick of 0.5%, positioning itself for its most substantial daily gain since Dec. 21. Simultaneously, the tech-heavy Invesco QQQ Trust (NASDAQ:QQQ) surged 1.2%, on course for its strongest performance since Dec. 13. Additionally, small-cap stocks, as represented by the iShares Russell 2000 ETF (NYSE:IWM), saw a 1% increase. However, the SPDR Dow Jones Industrial Average ETF (NYSE:DIA) slightly bucked the trend, dipping 0.1%, primarily influenced by a decline in Boeing Co (NYSE:BA)’s shares.
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