US Consumers Expect Higher Inflation in One Year... Anticipate Worsening Household Finances and Unemployment Rate

New York Fed's February Consumer Expectations Survey
Inflation Expectations Rise Across All Sectors
Concerns Grow Over Tariff Hikes and Household Finances

American consumers are expecting inflation to rise and household finances to worsen in the future. It is analyzed that concerns have grown that price increases could become entrenched due to tariff hikes under the second term of the Donald Trump administration.

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On the 10th (local time), the New York Federal Reserve Bank surveyed consumer expectations for February this year and found that the median expected inflation rate for the next year rose to 3.1% from 3.0% in the previous month. Inflation expectations increased across all sectors including gas, groceries, healthcare, and college tuition.

The median expected inflation rate for 3 and 5 years ahead remained steady at 3%, the same as the previous month.

The expectation of inflation rising in one year appears to be a result of consumers' growing concerns that prices will increase due to tariff hikes and expanded illegal immigration crackdowns by the Trump administration.

Consumers' outlook on household finances also worsened. The proportion of households expecting their financial situation to deteriorate in one year reached 27.4%, the highest level since November 2023.

The probability that the U.S. unemployment rate will be higher in one year rose by 5.4 percentage points from the previous month to 39.4%, the highest since September 2023. The probability of job loss over the next year decreased slightly by 0.1 percentage points to 14.1%, and the probability of voluntary resignation fell by 2.3 percentage points to 17.6%, the lowest since July 2023.

The probability of failing to repay debt over the next three months increased by 1.3 percentage points from the previous month to 14.6%, the highest since April 2020.

Market fears of a tariff-induced recession are growing. It is expected that tariff hikes by the Trump administration will lead to price increases, reduced consumption, decreased corporate investment, layoffs, and slower growth. JP Morgan raised the probability of a U.S. recession from 17% in November last year to 31% recently. Goldman Sachs also increased its forecast from 14% in January this year to 23%.

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