Consumers don’t expect their incomes to grow as fast as prices

Consumers don’t expect their incomes to grow as fast as prices
Consumers don’t expect their incomes to grow as fast as prices

Consumers are getting gloomier about where they think inflation is going, at least in the short term.

According to April’s Survey of Consumer Expectations from the New York Federal Reserve Bank, which came out Monday, consumers expect annual inflation to be around 3.3% a year from now. That’s up three-tenths of a percentage point from March and the highest it’s been since November. Another note of gloom in the survey data: Consumers think their income growth will lag behind inflation.

George Mason University economist Christine McDaniel has found herself getting annoyed at lettuce in the last few years. Specifically, its price in the grocery store.

“It’s still much higher than what I remember. And my wages have not gone up that much. You know, that kind of sets the tone for me for the rest of that shopping trip,” McDaniel said.

McDaniel said Monday’s report shows that consumers expect that kind of discrepancy to continue. Not just with lettuce, but all food. Not to mention gas and housing.

“And you know, that makes people kind of anxious,” she said.

The survey also notes that consumers expect their household spending to rise, but Wells Fargo senior economist Tim Quinlan pointed out that many people are relying on credit cards to maintain their level of spending.

“And I think when you’re kind of dipping into credit every month to sustain the spending, it doesn’t feel good,” Quinlan said.

Especially when consumers are less certain that their earnings will grow as much as they had expected in the coming year. And they’re holding on to their jobs: The survey also finds consumers say they’re less likely to quit. Quinlan said people are picking up on a slight loosening in what had been a very tight labor market.

“You’re just no longer seeing as many, you know, people advertising outside of their businesses saying, ‘Help wanted urgently.’”

While trying to keep their jobs, consumers expect to spend more on the need-to-haves, like housing and food. Fun, discretionary want-to-haves might get squeezed, said Middlebury College economics professor Kristina Sargent.

“So I think if I were in an industry that relied on those discretionary purchases, I would be a little bit nervous by this report,” Sargent said.

That includes hospitality and travel. Sargent said if she were in either of those businesses, she’d shift from marketing two-week trips to short getaways. “You know, a weekend here and there or a fancy dinner out,” she said.

She’d also start targeting her messages to people who live nearby, so they wouldn’t have to spend as much to get there. Like, “Hey people of Philadelphia! Wanna visit Baltimore?”

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