The newest survey out from the New York Federal Reserve should raise a lot of alarms about this dangerous trend. Notably, respondents anticipate a dramatic increase in costs for food and medical care in the next year. It pushes the outlook for food prices to 5.2%, a new high since May 2024. Furthermore, rent where available has increased more sharply, having jumped to 7.2%, up half a percentage point from the last round of projections. Not surprisingly, this trend raises red flags. The country can no longer afford that economic roulette after President Donald Trump’s “liberation day” tariff blunder of April 2.
The survey showed that respondents now see inflation reaching 3.6% one year from today. This projection represents a 0.5-percentage point hike since February. In comparison, inflation expectations for a five-year horizon edged lower to 2.9%, a decline of 0.1 percentage point. The three-year view did not budge, holding steady at 3%, indicating that while short-term worries are palpable, the longer-run expectations are stable.
Medical care costs are about to skyrocket. All twelve respondents have a 7.9% increase in mind, which would be the largest leap since the month of August 2024. At the same time, global healthcare costs are rising, further complicating an already stressed consumer base. Prices of other basic necessities have skyrocketed, putting even more pressure on people’s wallets.
The biggest takeaways
Inflation predictions aside, the most significant findings of the survey point toward increased fears about the strength of the labor market. Their probability measure of the unemployment rate increasing over the next one year jumped to 44%. This is a huge 4.6 percentage point jump from prior estimates. This figure takes us back to the levels during the very early days of the Covid-19 pandemic in April 2020. First, it signals increased anxiety all consumers have about the permanence of their job.
Impressions of how well the market was doing are different. Only 33.8% of Fannie’s respondents think the market will be higher a year from now, down 3.2 percentage points. This is the weakest print since June 2022, suggesting renewed fragility amid an ongoing lack of confidence in the economic bounce-back.
Respondents expect a 3.2% increase in gasoline prices. This forecast shows a modest drop of 0.5 percentage points from the forecast in February. As a result, expectations for gold prices have skyrocketed. Respondents are now predicting a 5.2% increase, the most optimistic projection since April 2022.
These survey results are consistent with data from the University of Michigan consumer sentiment survey. In mid-April, that survey showed that one-year inflation expectations were at their highest levels since November 1981. This perfect storm of data highlights a trend we’re seeing in increased inflation anxieties among consumers.
Perhaps not surprisingly, the New York Fed conducted this survey just before President Trump went all-in on new tariffs. These tariffs are likely to have a material impact on economic conditions and consumer prices. With tariffs already in place, there are major questions about inflation and steel-related job stability. All of this can leave consumers understandably panicked about any number of financial uncertainties.