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Gradual Improvement In Consumer Expectations Halted

Keith Griffin
Aug 21, 2020
Federal Reserve Bank

Things had been looking sunnier for consumer expectations in May and June as the country gradually re-opened. That all changed in July, according to the Federal Reserve Bank of New York’s Center for Microeconomic Data.
The report shows household expectations regarding their employment prospects and their year-ahead financial situation slightly deteriorated in July after two months of gradual improvement. Other indicators, such as the expected growth in home price and in household income, remained steady at a considerably higher level than in March and April, but below their pre-COVID-19 levels.
The main findings from the July 2020 Survey are:
  • The median expected year-ahead home price change remained steady at 2.0%. Although the July reading affirms the rebound from a series’ low of 0% reached in April 2020, it remains well below the 2019 average of 3.0%. The median expected home price change decreased in July among respondents with household incomes below $50,000, while it increased among respondents with higher incomes.
  • Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—started increasing again in July after three consecutive months of decline since reaching a series high of 50.9% in March. From 35.1% in June, it went up to 39.3% in July.
  • The mean perceived probability of losing one’s job in the next 12 months rose from 15.0% in June to 16.0% in July, above its 2019 average of 14.3% and its year-ago value of 13.8%. The mean probability of leaving one’s job voluntarily in the next 12 months was steady in July at 18.9%, below its 2019 average of 21.0%.
  • Perceptions of credit access compared to a year ago and expectations for year-ahead credit availability became more dispersed in July, with both more respondents reporting or expecting credit to be harder to obtain and more respondents reporting or expecting credit to be easier to obtain. The two measures continue to indicate reduced credit availability compared to the pre-COVID-19 levels.
  • Perceptions about households’ current financial situations compared to a year ago in July remained close to their June readings. In contrast, one-year ahead expectations about households’ financial situations deteriorated with more respondents expecting their financial situation to worsen and fewer expecting it to improve. Both perceptions and expectations of financial conditions remain weak compared to pre-COVID-19 readings.
The Survey of Consumer Expectations is a nationally representative, internet-based survey of a rotating panel of approximately 1,300 household heads. Respondents participate in the panel for up to 12 months, with a roughly equal number rotating in and out of the panel each month. Unlike comparable surveys based on repeated cross-sections with a different set of respondents in each wave, our panel allows us to observe the changes in expectations and behavior of the same individuals over time.
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