US households are growing increasingly anxious about their financial situations, with pessimism reaching levels not seen since mid-2022, according to a Federal Reserve Bank of New York survey.
The central bank’s monthly Survey of Consumer Expectations, released Monday, showed the general perception of personal financial conditions deteriorating sharply despite inflation expectations remaining broadly stable.
The share of households describing their current situation as “much worse” than a year ago jumped to 13.3%, the highest reading since July 2022.
That figure represented a rise of approximately 2.7 percentage points from April alone, signalling a rapid deterioration in consumer sentiment within a single month.
When combining those who see their situation as either “much worse” or “somewhat worse,” the total reached 43.7%, which the New York Fed identified as the highest reading since January 2023.
The forward-looking data offered little comfort, with 36% of respondents expecting their financial situations to be either much or somewhat worse over the coming year.
Only 22.9% of those surveyed expected conditions to improve, and the net gap between optimists and pessimists fell to its lowest point since October 2022.
The survey arrives as consumers remain fearful over the inflationary impact from the Iran war, which has sent energy prices soaring across the country.
Some Fed policymakers have recently expressed concern that a prolonged conflict could entrench inflation expectations among consumers and businesses, creating longer-term price pressures beyond a typical temporary supply shock.
Despite the deepening gloom over personal finances, inflation expectations themselves remained largely unchanged across all time horizons surveyed.
Expectations at the one-year horizon declined just 0.1 percentage point to 3.5%, while the three- and five-year outlooks held flat at 3.1% and 3% respectively.
Expectations for gasoline prices dipped 0.1 percentage point to 5%, though the food outlook rose 0.6 percentage point to 5.8% and rent expectations climbed 1.4 percentage points to 7.4%.
Expectations for household spending growth over the next year also eased, falling 0.4 percentage point from April to settle at 5%.
Consumers were set to receive their next major inflation data point on Wednesday, when the Bureau of Labor Statistics was due to release the consumer price index for May.
Economists surveyed by Dow Jones anticipated headline inflation rising to 4.2%, with core inflation, which excludes food and energy, expected to increase to 2.9% against the Fed’s 2% target.
The Federal Open Market Committee is scheduled to make its next interest rate decision on June 17, with markets pricing in almost no chance of a rate cut and growing expectations of a quarter-point hike before the year ends.