Inquiring minds are diving into the New York Fed Survey of Consumer Expectations report for August.
Median inflation expectations at both the one- and three-year horizons were unchanged at 3.0 percent for the third straight month. Median expected household income growth rebounded slightly to 2.7 percent, reversing a three-month decline. The outlook for household spending growth and year-ahead earnings growth also recovered from recent dips.
One Year Look-Ahead Household Income Growth Expectations
Income Projections July 2018
- 25% Level: 0.80%
- Median: 2.78%
- 75% Level: 5.91%
One Year Look-Ahead Spending Expectations
Spending Projections July 2018
- 25% Level: 0.48%
- Median: 3.23%
- 75% Level: 9.13%
One Year Look-Ahead Inflation Expectations
Inflation Projections July 2018
- 25% Level: 1.19%
- Median: 2.98%
- 75% Level: 4.92%
Inflation Synopsis
The current year-over-year CPI is 2.9%.
The median expected CPI looking one year ahead is 2.98%. The high and low projections are 4.92% and 1.19% respectively.
Note: in the analysis below, I used the median inflation expectation as a comparison in all cases because the percentile inflation expectation is highly unlikely to correlate to the same income and spending groups.
Median Synopsis
The median income and spending projections are 2.78% and 3.23% respectively.
For the median household, income will not quite keep up with current inflation or expected inflation. Income palls short of expected inflation by 0.20 percentage points.
Spending will outstrip income by 0.45 percentage points.
25th Percentile Synopsis
The 25th percentile income and spending projections are 0.80% and 0.48% respectively.
For the 25th percentile household, income gains underperforms the median inflation projection by 2.18 percentage points. That grim assessment is likely on the mark.
This group expects to spend less than income by 0.32 percentage points.
75th Percentile Synopsis
The 75th percentile income and spending projections are 5.91% and 9.13% respectively.
The 75th percentile household expects to spend 3.22 percentage points above their expected income gain.
Counting on stock market gains are we?
Overall Assessment
The median person expects to scrape by, going a bit more in debt to maintain lifestyle.
The high end is likely counting on further stock market gains to propel spending.
The low end wants to save but expects to get hammered by inflation, a strong likelihood even compared to the low-end inflation assessment of 1.19%.
Mike “Mish” Shedlock
The problem with inflation is that stuff gets replaced on the inflation index the government uses. So price spikes are not measured accurately.
At the end of this cycle the debt will have to be written off by banks again. And it will be worse this time because government spending wont save the day like 2010. By 2020 we will enter a recession that wont end for the better part of decade. Anyone who started investing after 2008 doesnt have the memories of the last two busts to remember. I also expect more fires and floods in the coming decade that will force populations to move inland. Mother nature does not care about economics or money and doesnt follow the rules or capitalism or any other ism.
This is the intended end-game for an ‘ownership society’ (crony capitalism)… a few at very top rake-in most everything, while everyone else is just a debt battery that keep the system going until the current (currency) is too weak to matter.
It’s the intended end game for all systems of government. Those in the Party gets armed guards and separate traffic lanes, the rest are disarmed and gets to fellate them at gunpoint. The only difference between various governments, is simply how big they are; hence how able they are to achieve the above intended end state as quickly and thoroughly as possible.
Any other trumped up difference than simple size, is just mindless obfuscation. To keep the well indoctrinated and uncritical, clueless and pliant enough to believe the scam that their particular system of government, their particular Dear Leader, is somehow diiiiferent.
So if you are in the small portion of the population who makes substantial money you’ll do great unless there is a stock rout. Everyone else will either go into (further) debt or fail to save anything due to cost of living.