Fed Finds Consumers Optimistic About Credit but Not Inflation

U.S. consumers are feeling more optimistic about their financial conditions and access to credit.

That’s according to the January 2024 Survey of Consumer Expectations, released Monday (Feb. 12) by the Federal Reserve Bank of New York’s Center for Microeconomic Data.

“Perceptions of credit access compared to a year ago improved notably with a decreased share of respondents reporting that it is more difficult to obtain credit now than a year ago, and a larger share reporting that it is now easier to do so,” the report said.

“Similarly, expectations about future credit access also improved with a decreased share of respondents expecting tighter credit conditions a year from now.”

Consumers’ perceptions about the current state of their household finances improved last month as well, with more people saying they were better off than a year ago and fewer respondents describing themselves as worse off. Year-ahead expectations improved as well, with a smaller number of respondents expecting to be worse off and a greater share of respondents expecting their situations to improve year from now.

“The percentage of respondents expecting to be financially the same or better off 12 months from now is 76.5%, its highest level since September 2021,” the report said.

But while consumer outlook has improved in respect to some areas of the economy, the survey also found that median inflation expectations were unchanged at the one- and five-year ahead horizons, while that metric declined at the three-year mark.

“Median inflation uncertainty — or the uncertainty expressed regarding future inflation outcomes—increased slightly at all three horizons,” the report said.

Meanwhile, consumers expect their wages to increase in the year to come, though they’re less optimistic about the overall labor market.

The survey showed the median one-year ahead expected earnings growth rising by 0.3 percentage point to 2.8%, “returning to the narrow range of 2.8% to 3.0% seen between September 2021 and October 2023.”

However, mean unemployment expectations — or the mean probability that America’s unemployment rate will be higher one year from now — rose marginally to 37.2% from 37.0%.

This mix in consumer sentiment reflects the most recent edition of the University of Michigan’s Surveys of Consumers. Those findings, as PYMNTS wrote last week, indicate that “there’s at least some evidence of some caution in the mix, and that optimism may not translate into increased activity at merchants’ (online and offline) registers and checkouts.”

For example, while consumer sentiment has reached its highest level since July 2021 and 41% of consumers expect good times in the year ahead for business conditions, 48% expect bad times ahead. And even with consumer sentiment improving, it remains 7% below the historical average since 1978.