NY Fed Survey Inflation Expectations Make Mockery Of UMich Propaganda

We have repeatedly said that the UMichigan survey – skewed ridiculously higher by the laughably outlier opinions of Democrats…

5Y inflation expectations: Market vs Democrats pic.twitter.com/h3o9CDHIpQ

— zerohedge (@zerohedge) April 11, 2025

… has become a politicized farce (one overseen by rabid marxist professors with TDS such as Justin Wolfers, who at $600K per year, is rather generously overpaid for a communist). Moments ago the latest NY Fed Consumer Expectations Survey confirmed as much, when it not only reported that 5Y inflation expectations declined to 2.9% from 3.0%, the lowest since January…

… but that 3Y inflation expectations were unchanged and 1Y inflation expectations rose to 3.6% from 3.1%.

Not surprisingly, two-year yields promptly fell to session lows after the inflation data hit the tape, because the NY Fed survey now openly contradicts UMich as one-year inflation expectations – which rose to 3.6% in March, the highest since September 2023 – remained far, far lower than the Democrat-skewed 6.7% preliminary print for the April UMich report.

But even more importantly, expectations on a longer, five-year horizon have slid to 2.9% in the New York Fed survey. That makes the UMich survey, or rather the folks it polls, look literally retarded and will promptly reverse any ludicrous jitters that inflation expectations are getting unanchored on Main Street.

Some more highlights from the inflation panel:

• Median inflation uncertainty (the uncertainty expressed regarding future inflation outcomes) decreased at one- and five-year-ahead horizons and was unchanged at the three-year-ahead horizon.
• Median home price growth expectations decreased by 0.3 percentage point to 3.0% in March. This series has been moving in a narrow range between 3.0% and 3.3% since August 2023.
• Median year-ahead expected price growth increased by 0.1 percentage point for food to 5.2% (its highest level since May 2024), 0.7 percentage point for the cost of medical care to 7.9%, and 0.5 percentage point for rent to 7.2%. Median year-ahead price expectations fell by 0.5 percentage point for gas to 3.2% and 0.2 percentage point for the cost of college education to 6.7%.

While the NY Fed data greatly reduced stagflationary concerns, it did underscore the threat of looming economic slowdown and an outright recession, to wit: unemployment, job loss, and earnings growth expectations deteriorated, while household income growth expectations declined. Households were also more pessimistic about their year-ahead financial situations and credit access. Finally, stock price expectations declined and reached the lowest level since June 2022.

First, looking at the labor market:

• Median one-year-ahead earnings growth expectations fell by 0.2 percentage point to 2.8% in March, equaling its 12-month trailing average. Needless to say, it’s tough to have rising inflation when earnings are collapsing, but good luck explaining that to Democrats.

• And this is where alarm bells for the Fed should be going off because while stagflation is clearly off the table, recession is becoming the biggest threat: consider that mean unemployment expectations, or the probability that US jobless rate will be higher 1 year from now, rose 4.6% percentage points m/m to 44.0%; this was the highest reading since April 2020.

• There’s more: the perceived probability of losing one’s job in the next 12 months increased by 1.6 percentage points to 15.7%, the highest level since March 2024. The increase was largest for respondents with annual household incomes below $50,000. The mean probability of leaving one’s job voluntarily in the next 12 months increased by 0.4 percentage point to 18.0%, remaining far below the 12-month trailing average of 19.7%.

Turning from the labor market to household finances, things go from bad to worse:

• Perceptions about households’ current financial situations compared to a year ago deteriorated slightly, with a larger share of households reporting a worse financial situation compared to a year ago. Year-ahead expectations about households’ financial situations also deteriorated in March. The share of households expecting a worse financial situation in one year from now rose to 30.0%, the highest level since October 2023.

• The median expected growth in household income decreased by 0.3 percentage point to 2.8% in March, falling below its 12-month trailing average of 3.0%. The decline was most pronounced for respondents with at most a high school degree and for those with annual household incomes under $50,000.
• Median household spending growth expectations declined by 0.1% point to 4.9%.
• Perceptions of credit access compared to a year ago showed a larger share of households reporting it is harder to get credit. Expectations for future credit availability also deteriorated, with a larger share of respondents expecting it will be harder to obtain credit in the year ahead.
• The average perceived probability of missing a minimum debt payment over the next three months decreased by 1.0 percentage point to 13.6%, remaining slightly above the 12-month trailing average of 13.4%.
• The median expectation regarding a year-ahead change in taxes at current income level decreased by 0.2 percentage point to 3.2%.
• The mean perceived probability that the average interest rate on saving accounts will be higher in 12 months increased by 0.7 percentage point to 26.1%.
• The mean perceived probability that U.S. stock prices will be higher 12 months from now dropped by 3.2 percentage points to 33.8%, the lowest level since June 2022.
•  

Last but not least, the latest confirmation that DOGE is working:

• Median year-ahead expected growth in government debt decreased by 0.4 percentage point to 4.6%, the lowest reading of the series since its start in June 2013.

More in the full NY Fed survey available here.