Household Income And Spending Projections Vs Current And Projected CPI

Every month the Fed does a survey of consumer expectations. Let’s compare the CPI to what consumers say they will do.

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

One Year Look-Ahead Spending Expectations

Spending Projections July 2018

One Year Look-Ahead Inflation Expectations

Inflation Projections July 2018

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.