Inflation Headaches

There’s something about the NY Fed consumer survey that gives me a headache.

Not literally. I don’t get headaches, but if I did, these are the sorts of reports I imagine might trigger them.

Nobody generally cares about the survey, it never moves markets that I’m aware of, and yet somehow, covering it feels obligatory. There’s nothing worse than something which is both pointless and obligatory. Maybe that’s why life is annoying most of the time. It’s both pointless and obligatory.

Dark humor aside, the June vintage of the Fed’s consumer poll was released Monday to exactly no fanfare, and it contained no information that I’d be inclined to describe as worth mentioning but… well, “obligatory.”

Year-ahead inflation expectations receded to a new two-year low of just 3.8%, effectively in line with headline CPI, which is seen falling to 3.1% in this week’s update.

The trend is pretty uniform across demographic cohorts, although near-term expectations did move higher for the “high school or less” group. Year-ahead expectations in the University of Michigan poll are now just 3.3%, you’re reminded.

Although expectations at the three-year point in the NY Fed survey were unchanged at 3%, it was perhaps notable that the five-year point saw expectations move up to the same 3%, a full percentage point higher than the lows from August of last year. I wouldn’t call that a “de-anchoring,” and the five-year series is new, but the Fed is obviously sensitive to upward “drift” in the longer run measures. Disagreement about price growth out five years increased, indicative of macro ambiguity beyond the near- to medium-term.

If there was a standout from the June vintage of the Fed poll is was another increase in median home price growth perceptions. At 2.9%, that series now sits at an 11-month high.

June’s increase was the fifth straight. It was driven by respondents with a college degree and those living in the south and west census regions.

Some western states have seen large price declines, and therefore big home equity losses since the market peaked, and the perception of relative bargains in the south compared to more expensive locales is perhaps giving buyers the impression of “room to run,” if you will.

Although the average probability of an increase in the unemployment rate over the next year fell to the lowest in 14 months in the survey, responses from those 40 and over drove the perceived odds of being fired up to 12.9%, the highest reading since November of 2021. For context, that’s still far below the series average of 14.2%.