DS News - U.S. Bank

16 CAN CONSUMERS FULFILL THEIR DEBT OBLIGATIONS? Consumers' expectations of home price growth cooled slightly in June, while the percentage of consumers who think credit will become easier to access over the next year declined, according to the July 2018 Survey of Consumer Expectations, released in mid- August by the Federal Reserve Bank of New York. After climbing to a recent survey high of 3.9 percent in June, the median home-price change expectation declined to 3.7 percent. e dip in July still leaves the number elevated from its trailing 12-month average, which is 3.4 percent. When it comes to credit access, the Federal Reserve said, "Perceptions of credit access compared to a year ago improved slightly, while expectations for year-ahead credit availability deteriorated, with a slightly smaller proportion expecting improving conditions." In July, 19.65 percent of consumers surveyed said they believe it will be easier to gain access to credit in a year, while 30.53 percent said it will be harder. In June, 21.69 percent of respondents said they thought it would be easier to access credit a year down the road, while 30.62 percent said it would be harder. e percentage of consumers who said credit is easier to access today than a year ago in July was 23.68 percent, compared to 23.58 percent in June. e percentage who said it is now harder to obtain access to credit dipped from 27.96 percent in June to 27.13 percent in July. Expectations of household income growth rose just slightly in July, while expectations of earnings a year from now decreased over the month. Median household income growth is expected to be around 2.8 percent, according to the July survey, up 0.1 percentage point from a month earlier. Consumers expect earnings growth one year into the future to be about 2.4 percent as of July, down from 2.7 percent expected in the June survey. e Federal Reserve Bank of New York pointed out that this puts the percentage just below "its 2.5 percent -2.7 percent range since November 2017," adding that, "e decline was broad-based across income groups, but largest among younger (below age 40) respondents." When it comes to paying off debts, consumer optimism increased in July. Consumers believe the probability they will miss a minimum debt payment sometime in the next three months is about 11.8 percent, down from 12.4 percent in June. Since the start of the survey in June 2013, the lowest perceived probability of missing an upcoming debt payment has been 10.7 percent, while the highest was 17.2 percent. July's number sits near the lower end of this spectrum. Consumers continue expecting tax increases, with the median expectations of year-ahead changes, assuming the same income levels, reaching 2.2 percent in July after rising steadily since February when it reached a low of 1.5 percent. Consumers expect to spend a little less moving forward in July than they reported in the June survey. Median household spending growth is expected at 3.2 percent, down from 3.3 percent a month earlier but still a little stronger than its 12-month trailing average of 3 percent. Also notable in the Fed survey—the share of consumers who expect stock prices to be higher 12 months in the future fell to its lowest level since October 2016, reaching 40.3 percent in July.

• Cover