Americans are increasingly concerned about their financial situation amid expectations that inflation could pick up, according to a New York Federal Reserve survey released Tuesday.
The central bank’s monthly Survey of Consumer Expectations found that consumers expect inflation to be higher in the year ahead, and fewer expect their households’ financial situations to be better off a year from now.
Household spending growth expectations also declined, the New York Fed’s survey found.
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While many Americans have expressed worries about rising prices and the effect of President Donald Trump’s tariff policies, few have changed their spending habits yet. Up until now, experts say, that is what has helped the U.S. avoid a significant economic slowdown.
But Americans are having a harder time keeping up, other research shows. High food costs, in particular, make it more difficult to cover expenses in a typical month. Grocery prices rose by 2.7% in August from a year earlier, the fastest annual pace since August 2023, according to the latest consumer price index.
“Few things drive Americans’ perception of the economy more than grocery prices,” said Matt Schulz, chief credit analyst at LendingTree. “If people are convinced that those are just going to keep rising, it stands to reason that fewer people would think that their own household’s financial situation would be better off a year from now.”
‘A complex set of uncertainties’
Despite the cautious Fed outlook, a separate report by KPMG shows consumer spending is set to increase heading into the peak shopping season at the end of the year.
“The consumer is spending like a poker player with a small chip stack,” Duleep Rodrigo, KPMG’s U.S. consumer and retail leader, said in a statement.
“They know they can’t play every hand but are willing to go ‘all in’ on a promising hand with a high emotional payoff,” he said of projections that holiday spending will increase compared to last year.
“There’s also a psychological element where the consumer is managing a complex set of uncertainties,” Rodrigo said.