U.S. consumers’ expectations for inflation increased in February, with a particularly sharp rebound in gas prices expected over the next year, according to a new survey by the Federal Reserve Bank of New York.
Consumers polled for the February 2016 Survey of Consumer Expectations on average expect prices to rise 2.7% over the next year, compared to 2.4% in January’s survey. Median inflation expectations over the next three years were 2.6% in February’s survey, compared to 2.5% in January.
The survey also suggests consumers aren’t expecting the slump in oil prices to continue much longer. Median one-year ahead expectations for gasoline prices rose from a 2.8% increase in January to 4.9% in February. The gain marks a return to levels not seen since the summer of 2015.
For home prices, expectations on average rose by 0.1 percentage point in February to 3.1%, while those for medical care, college education, and rent also rose slightly. Food price expectations remained unchanged.
Consumers were also more optimistic about income. After two months of declining expectations, they expect 2.5% growth in earnings over the next year, back to levels recorded for most of 2015.
The increase was broad-based across demographic groups, but was most pronounced among respondents with a high school degree or less.
Median expected household income growth rose to 2.5%, from 2.2% the prior month, remaining lower than levels seen through most of 2015. However, median household spending growth expectations rebounded to 4%, closer to the historic average of 4.3% and a solid contrast to the December low of 2.9%.
The survey is conducted for the New York Fed by The Demand Institute, a non-profit organization jointly operated by The Conference Board and Nielsen.