This post provides an update on two earlier blog posts (here and here) in which we discuss how consumers’ views about future inflation have evolved in a continually changing economic environment. Using data from the New York Fed’s Survey of Consumer Expectations (SCE), we show that while short-term inflation expectations have continued to trend upward, medium-term inflation expectations appear to have reached a plateau over the past few months, and longer-term inflation expectations have remained remarkably stable. Not surprisingly given recent movements in consumer prices, we find that most respondents agree that inflation will remain high over the next year. In contrast, and somewhat surprisingly, there is a divergence in consumers’ medium-term inflation expectations, in the sense that we observe a simultaneous increase in both the share of respondents who expect high inflation and the share of respondents who expect low inflation (and even deflation) three years from now. Finally, we show that individual consumers have become more uncertain about what inflation will be in the near future. However, in contrast to the pre-pandemic period, they tend to express less uncertainty about inflation further in the future.
The National Flood Insurance Program (NFIP) was designed to reduce household and lender flood-risk exposure and “encourage lending.” In this post, which is based on our related study, we show that in certain situations the program actually limits access to credit, particularly for low-income borrowers—an unintended consequence of this well-intentioned program.
Supply chain disruptions continue to be a major challenge as the world economy recovers from the COVID-19 pandemic. Furthermore, recent developments related to geopolitics and the pandemic (particularly in China) could put further strains on global supply chains. In a January post, we first presented the Global Supply Chain Pressure Index (GSCPI), a parsimonious global measure designed to capture supply chain disruptions using a range of indicators. We revisited our index in March, and today we are launching the GSCPI as a standalone product, with new readings to be published each month. In this post, we review GSCPI readings through April 2022 and briefly discuss the drivers of recent moves in the index.
As the economy continues to recover from the pandemic, a combination of strong demand, severe supply disruptions, widespread labor shortages, and surging energy prices has contributed to a rapid increase in inflation. Indeed, the inflation rate, as measured by the Consumer Price Index (CPI), has exceeded 8 percent over the past year, the fastest pace of price increase since the early 1980s. If businesses and consumers expect inflation to be high in the future because it is elevated today, they may change their behavior accordingly, which can make inflation even more persistent. In other words, expectations about the path of future inflation can affect how current inflation will actually evolve. In particular, among businesses, expectations about future inflation can shape how they set wages and prices. Our May regional business surveys asked firms what they expected inflation to be one year, three years, and five years from now. Responses indicate that while businesses, like consumers, expect high inflation to continue over the next year, such elevated levels of inflation are not expected to persist over longer time horizons.
Tight inventories of homes for sale combined with strong demand pushed up national house prices by an eye-popping 19 percent, year over year, in January 2022. This surge in house prices created concerns that first-time buyers would increasingly be priced out of owning a home. However, using our Consumer Credit Panel, which is based on anonymized Equifax credit report data, we find that the share of purchase mortgages going to first-time buyers actually increased slightly from 2020 to 2021.
Total household debt balances continued their upward climb in the first quarter of 2022 with an increase of $266 billion; this rise was primarily driven by a $250 billion increase in mortgage balances, according to the latest Quarterly Report on Household Debt and Creditfrom the New York Fed’s Center for Microeconomic Data. Mortgages, historically the largest form of household debt, now comprise 71 percent of outstanding household debt balances, up from 69 percent in the fourth quarter of 2019. Driving the increase in mortgage balances has been a high volume of new mortgage originations, which we define as mortgages that newly appear on credit reports and includes both purchase and refinance mortgages. There has been $8.4 trillion in new mortgage debt originated in the last two years, as a steady upward climb in purchase mortgages was accompanied by an historically large boom in mortgage refinances. Here, we take a close look at these refinances, and how they compare to recent purchase mortgages, using our Consumer Credit Panel, which is based on anonymized credit reports from Equifax.