US consumers expect short-term inflation to double in earnings

By Jonnelle Mars

(Reuters) – Short-term inflation expectations for U.S. consumers rose in November and expectations for future earnings growth fell as price hikes suggest wage gains will be even faster in the short term, according to a poll released on Monday. By the New York Federal Reserve.

Food and other commodity prices have been rising at the fastest pace since 1982, according to data released by the Department of Labor last week, creating political challenges for President Joe Biden’s administration and boosting the Fed’s hopes of raising interest rates next year.

Higher inflation, driven by pandemic-related supply chain disruptions and changes in demand, are also eroding wage gains, with some consumers expecting this situation to worsen in the short term, according to a New York Fed survey. Although near-term inflation expectations rose, year-over-year earnings expectations fell in November.

Consumers said they expect inflation to reach an average of 6.0% in a year, compared to a forecast of 5.7% in October. Expectations for annual earnings growth fell to 2.8% in November from 3.0% in the previous month.

This would increase inflation by 3.2 percentage points faster than earnings in one year, the largest difference since the survey began in 2013.

Over the three-year average, however, inflation expectations fell to 4.2% from 4.2%, with the first falling in June and the second falling only in October 2020. New York Fed Survey.

INFLATION INFLUENCED EMPLOYMENT

Inflation is currently the main economic concern expressed by American consumers, according to the latest survey from the University of Michigan’s Consumer Sentiment Index.

“When asked directly whether inflation or unemployment is the nation’s most serious problem, 76% chose inflation and only 21% chose unemployment,” Richard Curtin, the director of the survey, said in a statement on Friday. in early December.

Fed officials, driven by continued high inflation and lower-than-expected unemployment, may announce after a policy meeting this week that they plan to end the bond-buying program faster to clear the way for the rate hike.

Some officials say they are concerned that low interest rates could lead to higher gains on stock market prices, real estate values ​​and other asset prices.

The survey showed that expectations for future house price growth have fallen slightly over the past month, but consumers still expect stronger growth than before the coronavirus pandemic. Consumers say they expect home prices to rise by a 5% median in a year, from 5.6% in October but well above the 3.1% expected in February 2020.

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