Trump expectations rise, inflation expectations fall
In a presidential election year, many economic surveys cannot escape the significance of expectations for the presidential election results.
Federal Reserve Bank of New York Monthly survey of consumer expectations Showed Surprising fall in inflation expectations The median inflation expectation for the three-year future fell 0.6 percentage points to 2.3 percent, the lowest level since the survey began in June 2013.
What makes this result even more strange is Inflation expectations for the next one and five years remained unchanged.3.0% and 2.8%, respectively, indicating that Americans think inflation will remain high over the next year, then fall for a few years, and then start to rise again.
The simplest explanation for this outcome is politics. People expect inflation to fall if Donald Trump is electedAnd in July they predicted a Trump victory, which helps explain why inflation expectations fell in the second and third years of Trump’s second term, before rising again under his successor.
Kamala Harris and Trump are neck and neck in most polls, with Harris widely seen as ahead among both likely voters and likely winners, but that wasn’t the case for most of July when the New York Fed survey was conducted. 49% of Americans expect Trump to win in NovemberAccording to a YouGov poll, only 26 people predicted Joe Biden would win. economist.
Further evidence of this can be seen in the breakdown of inflation expectations by education level. 50% of Americans with less than a high school diploma identify as Republicansand 36 percent of Democrats. Similarly, Trump leads in most surveys of non-college educated voters.
A New York Fed survey found that College graduates’ inflation expectations over the next 12 months remained unchanged.and then increases of 0.1 percentage points over the next three and five years, with little change overall.
However, inflation expectations among those with a high school education or less changed sharply. The following year, expected inflation fell from 3% to 2.5%. Five years later, the median expected inflation rate had fallen from 2.5% to 2.4%. But over that three-year period, the median expected inflation rate had fallen from 3% to 1.5%.
Federal Reserve Inflation Expectations of High School Graduates
In other words, Inflation expectations have fallen sharply among demographics that support Trump. About the presidency and how long he would serve as president if elected.
If our analysis is correct, inflation expectations could rise again if Harris is able to maintain or extend the gains in her approval rating of recent weeks.
Strange Flat Line in New York Fed Survey
In the New York Fed investigation, we noticed something very odd. Average earnings expectations for college graduates remain stable.
The New York Fed survey asks not only about inflation expectations, but also expectations about job security, household income, and income. The bank’s website allows you to break down the responses by age, education, income, numeracy, and region. (Interestingly, however, No breakdown by raceIn today’s race-obsessed world, this seems refreshing.
While digging through the latest data, we decided to look at the expected income growth of college graduates. The results surprised us. The series shows the expected month-by-month changes through June 2021. At that point, expected income growth rose to 3%, He would remain there for the next 37 months.
It is very rare for economic survey data of any kind to remain unchanged over such a long period of time, especially when the survey asks about something that is typically volatile, like earnings growth expectations. These tend to fluctuate quite a bit as they respond to economic conditions.
In fact, the earnings projections of people who attended college but didn’t get a degree, or those with less than a high school education, will remain precarious long after the pandemic ends. The expectations of college graduates Here is an example of this behavior:
I asked the New York Fed what was going on. A Fed spokesman told me: It’s not an error in the dataSo what else could it be? We’ll keep you posted as we get more clarity from the New York Fed.
