U.S. households are growing increasingly anxious about their financial situations, with a key measure of consumer distress hitting its highest level in nearly four years.
The Federal Reserve Bank of New York’s monthly Survey of Consumer Expectations, released Monday, showed a sharp deterioration in how Americans view their current financial standing.
The share of respondents describing their situation as “much worse” than a year ago jumped to 13.3%, an increase of roughly 2.7 percentage points from April’s reading.
That figure marks the highest level recorded since July 2022, underscoring deepening stress across American households amid ongoing economic pressures.
The combined share of those describing conditions as either much or somewhat worse than a year ago reached 43.7%, which the New York Fed identified as the highest since January 2023.
Looking ahead, consumers expressed little optimism, with 36% expecting their situations to be either much or somewhat worse over the coming year.
Only 22.9% of respondents said they expected their financial situations to improve, leaving a gap between optimists and pessimists at its widest since October 2022.
The survey arrives as consumers remain fearful over the inflationary impact from the Iran war, which has sent energy prices soaring and rattled household budgets across the country.
Some Fed policymakers have expressed concern that if the conflict persists, it could raise inflation expectations among consumers and businesses, making the problem longer term than a typical temporary supply shock.
Despite the deteriorating sentiment, consumer inflation expectations remained largely steady, with the one-year outlook rising just 0.1 percentage point to 3.5%.
The three- and five-year inflation outlooks held flat at 3.1% and 3%, respectively, suggesting longer-term price expectations have not become unanchored.
Expectations for gasoline prices actually dropped 0.1 percentage point to 5%, though the food outlook climbed 0.6 percentage point to 5.8% and rent expectations surged 1.4 percentage points to 7.4%.
Expected household spending growth over the next year slipped to 5%, down 0.4 percentage point from April, pointing to cautious consumer behavior ahead.
Consumers will get their next inflation data point Wednesday when the Bureau of Labor Statistics releases the consumer price index for May.
Economists surveyed by Dow Jones expect headline inflation rose to 4.2%, while core inflation, which excludes food and energy, increased to 2.9%, still well above 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.
Expectations are instead rising that the central bank will hike benchmark interest rates by a quarter percentage point before the end of the year, adding further pressure to already strained household budgets.
