Rising Delinquency Risk, Higher Long-Term Inflation: NY Fed Survey
Consumers are more concerned about falling behind on debt payments, with delinquency predictions reaching their highest level since April 2020, according to the New York Federal Reserve’s September 2024 Survey of Consumer Expectations.
Inflation expectations, meanwhile, remained unchanged in the short term and rose slightly for the medium- and longer-term horizons. For three years ahead inflation, median expectations were 2.7%, up from 2.5% in August, and for five years ahead, the median expectation increased to 2.9% from 2.8%.
The average perceived probability of failing to make a minimum debt payment within the next three months increased for the fourth consecutive month to 14.2%, up from 13.6% in the August survey, with regards to household finances. Respondents aged 40 to 60 and those with annual household incomes exceeding $100,000 experienced the most significant increase.
Consumers are not anticipating an increase in their income in the forthcoming year. The median anticipated increase in household income decreased by 0.1 percentage point to 3.0%, remaining within the range of 3.0% to 3.1% for the previous year. It remains higher than the pre-pandemic level of 2.7% observed in February 2020.
Median one-year-ahead expected earnings growth dropped by 0.1 percentage point to 2.8%, aligning with the 12-month trailing average of 2.8%. Median household spending growth is expected to also decline by 0.1 percentage point to 4.9%.
The employment outlook remained stable, with the mean perceived probability of losing one’s job in the next 12 months remaining at 13.3%. The mean probability of voluntarily abandoning one’s job in the upcoming year increased to 20.4% from 19.1%, with the most significant increase observed among respondents under the age of 40.
The mean perceived probability of finding a job if their current job is lost rose to 52.7% from 52.3% in August, below the 12-month trailing average of 53.6%.
The slightly lower expectations for household income growth, in conjunction with the unchanged year-ahead inflation expectations, suggest that consumers anticipate a decrease in their earnings power. The median inflation expectation remained at 3.0%, coincident with the expected growth in income.