Consumer Confidence in Household Income Growth Plunges

Consumers’ confidence in income growth took a hit in January.

Their median expected growth in household income dropped by 1.3 percentage points — the largest one-month drop seen in 10 years of the “Survey of Consumer Expectations” published by the Federal Reserve Bank of New York’s Center for Microeconomic Data, according to a Monday (Feb. 13) press release.

“January’s decrease was more pronounced among respondents with no more than a high school education, respondents older than 60 and those with annual household incomes below $50,000,” the Federal Reserve Bank of New York said in the release.

Despite the drop, January’s median expected growth in household income — which was gauged at 3.3% — was only slightly below the 12-month trailing average of 3.5% and well above the expectations recorded before the pandemic, according to the press release.

That drop was the largest change seen in the January edition of the monthly survey, which asks consumers about their expectations for inflation, prices, job prospects, earnings growth, future spending and access to credit.

Otherwise, there was little change in consumers’ expectations, the release said.

Median inflation expectations for the next year remained unchanged. The standout finding among the different purchase categories was around home prices; median home price growth expectations declined by 0.2 percentage point to 1.1 percent — the second lowest reading since May 2020, per the release.

The survey also found that median household spending growth expectations declined for the third consecutive month, perceived access to credit improved and perceived probability of missing a minimum debt payment over the next three months increased, according to the press release.

These findings come after a two-year period in which life has become more expensive.

PYMNTS’ proprietary analysis of data from the Bureau of Labor Statistics (BLS) found that the prices of most essential goods and services the consumers use on a daily basis — even excluding volatile energy prices — have increased by double-digit percentages since the beginning of 2021.

These increases have taken place over that two-year timeframe despite month-to-month ebbs and flows, according to “New Reality Check: The Paycheck-to-Paycheck Report: The Employment Edition,” a PYMNTS and LendingClub collaboration.