Consumers Become More Optimistic About Financial Conditions

Consumers’ expectations about their own financial conditions and credit availability improved in January, according to the Federal Reserve Bank of New York.

The Survey of Consumer Expectations revealed 76.5% of respondents expect their finances to be in the same state or improved 12 months from now, which is the highest level since September 2021.

The number of consumers that expected their household income to grow reached 3.1% in January, which was a 0.1 percentage point increase in December.

The report found that perceptions of credit access have also improved compared to a year ago.

Meanwhile, the average perceived probability of missing a minimum debt payment over the next three months decreased by 0.3 percentage points to 12.1%.

However, consumers had less optimistic expectations regarding the labor market and the cost of living.

Consumers’ inflation expectations remained broadly unchanged in January, with one-year remaining at 3% and five-year at 2.5%, although three-year expectations declined from 2.6% to 2.4% and the uncertainty around all expectations increased.

The number of consumers who expected the cost of rent to fall declined by 0.9 percentage points to 6.4%.

Only 4.3% of respondents expected gas prices to decrease and 4.9% expected food prices to fall.

The number of respondents who expect a price change in gas is the lowest since December 2022, while those for food and rent were the lowest since March 2020 and December 2020, respectively.

Expectations that the unemployment rate will be higher in one year also increased from 37% in December to 32.7% in January, but remain below the series 12-month trailing average of 39.2%.

Only 54.2% of respondents would expect to find another job if they became unemployed, which was a decrease of 1.7 percentage points and is the lowest reading since June 2021.