Americans See Inflation Stuck Where It Is Now—and Are Still Downbeat About the Economy

Despite American’s gloomy mood about their finances, they are still spending at a healthy clip. (Spencer Platt/Getty Images)

Key Points

• The Federal Reserve Bank of New York’s Survey of Consumer Expectations shows median inflation expectations remained at 3.2% for the next 12 months.
• Headline PCE inflation rose at a 2.8% annual pace in September, while core PCE decelerated to 2.8% from 2.9% in August.
• The perceived likelihood of losing a job decreased by 0.2 percentage points to 13.8%, the lowest reading since December 2024.

Americans are still worried about inflation and the broader state of the economy, but they are growing marginally more confident that inflation won’t get worse.

The Federal Reserve Bank of New York’s Survey of Consumer Expectations shows that households’ inflation expectations were unchanged in November across both the short and longer term, according to survey results released Monday.

Median inflation expectations for the 12 months ahead remained at 3.2%, unchanged from October. The three- and five-year horizons were also steady, both at 3%.

The survey’s results echo preliminary results from the University of Michigan’s consumer sentiment survey, released on Friday. Inflation expectations for the year ahead fell to their lowest levels since January, coming in at 4.1% year over year and marking the fourth straight month of declines in expectations. Longer-term expectations also fell.

The Bureau of Economic Analysis released personal consumption expenditures price index data for September on Friday, marking the first official inflation reading in months after releases were delayed because of the federal government shutdown. While inflation remains above the Federal Reserve’s 2% target—headline PCE inflation rose at a 2.8% annual pace in September from 2.7% in August—it remains contained. Core PCE, which strips out volatile energy and food costs, decelerated from August’s 2.9% rate to 2.8%, marking the first time since April that price increases slowed.

Economists have feared since April’s tariff announcement that the new levies would reignite inflation. While prices for consumer goods have risen, the “pass-through to core goods inflation has been more modest than many economists thought earlier in the year,” wrote Citi economist Gisela Young in a research note on Friday.

Scott Helfstein, head of investment strategy at Global X, notes that there is little evidence of an inflation spike in either consumer or producer inflation at this point, and the current price increases are “OK provided they remain in a predictable and reasonable range.”

The New York Fed’s stable inflation expectations suggest that consumers have also noticed that overall prices haven’t risen as quickly as previously feared.

The survey also hints that views on the current state of the labor market improved slightly, with the perceived likelihood of losing a job decreasing 0.2 percentage points to 13.8%, the lowest reading since December 2024. The odds of finding a job in the next three months increased slightly, as well.

That doesn’t mean Americans’ concerns about the broader state of the economy have been assuaged altogether. Household finance perceptions actually deteriorated in November, the New York Fed’s survey found.

“Perceptions about households’ current financial situations compared with a year ago deteriorated notably with a larger share of respondents reporting that their households were worse off compared with a year ago, and a smaller share reporting they were better off,” the survey found.

Expectations about year-ahead financial situations also deteriorated slightly.

Consumers believe it will be harder for them to access credit a year from now. The probability of missing a minimum debt payment in the next three months increased as well, rising 0.6 percentage points to 13.7%, which is modestly above the trailing 12-month average of 13.3%.

Respondents were also more pessimistic about the future state of their investments. The likelihood that U.S. stock prices will be higher 12 months from now fell by 1 percentage point to 37.9%.

Americans have been a gloomy bunch for the better part of the postpandemic years. So far, the dour mood hasn’t stopped them from spending, and early read-throughs from the holiday season and retail earnings suggest demand remains resilient.

“I think we can all agree the U.S. Consumer is saying he / she is worried, but as always…consuming in-line to above expectations,” wrote Carey Kaufman, U.S. consumer strategist at Jefferies. “Watch what we DO, not what we SAY.”

Write to Sabrina Escobar at sabrina.escobar@barrons.com