By Michael S. Derby
(Reuters) -Americans grew more worried about the economic outlook in February even as their expectations of the future path of inflation were little changed, a report on Monday from the Federal Reserve Bank of New York said.
According to the bank’s latest Survey of Consumer Expectations, inflation a year from now is seen at 3.1%, up a hair from January’s 3% reading, while the projected level of inflation three and five years from now was unchanged relative to January at 3%. The Fed wants inflation at 2%.
The bank’s relatively calm outlook for inflation contrasted, however, with expectations of accelerating price increases for food, rent, gasoline, college and medical costs, as well as a year-ahead expected rise in home prices of 3.3%. Uncertainty over the inflation outlook also rose. The bank’s data contrasts to a degree with other recent reports showing notable gains in expectations for future price rises.
The New York Fed report noted that “households expressed more pessimism about their year-ahead financial situations in February, while unemployment, delinquency, and credit access expectations deteriorated notably,” even as respondents to the survey - responses were collected over the course of last month - ramped up spending expectations.
The survey found that while households rate their current financial situation as little changed, the year-ahead outlook “deteriorated considerably” with those who expect a worse situation at its highest reading since November 2023.
According to the report, the expected probability that unemployment will be higher a year from now rose to its highest level since September 2023, as respondents marked down the prospects a person would voluntarily quit a job and said finding new work would be harder.
On the financial front, the survey found assessments credit access relative to a year ago is now more difficult, while expectations of the probability of missing a future debt payment ticked up to the highest level since April 2020, driven by the responses of those under 40 and those without a college degree.
The New York Fed report lands in a climate where anxiety over the future of the economy has been rising as the Trump administration presses forward erratically with an agenda of massive trade tariffs on the nation’s major trading partners.
Economists widely believe these policies, to the extent they are maintained, could drive up inflation from levels Fed officials already think are too high, while depressing growth and driving up future unemployment.
Central bankers and private sector forecasters are facing major challenges in forecasting what lies ahead, but a survey from Reuters shows rising recession fears for the whole of North America.