Consumers are entering the final months of the year less worried about losing their jobs, more worried about prices and less confident about where their household finances are headed.
The Federal Reserve Bank of New York’s September Survey of Consumer Expectations, released Wednesday (Oct. 7), shows median expected household spending growth rose 0.3 percentage point to 5.5%, the highest reading since May 2023. Expected household income growth rose only 0.1 point to 3.1%, its highest since February 2025.
Spending expectations rose broadly across age and education groups, according to the data. At the same time, consumers’ assessments of their current and future financial situations deteriorated. Larger shares reported being worse off than a year earlier and expected to be worse off a year from now.
The gap between expected spending growth and expected income growth does not necessarily mean consumers plan to increase the quantity of goods and services they buy. The September results suggest that part of the higher spending expectation reflects what households think those purchases will cost.
Prices Return to the Foreground
Median year-ahead inflation expectations climbed from 3.6% to 3.9%, the highest since May 2023. Three-year expectations rose from 3.2% to 3.3%, while the five-year measure held at 3%.
Consumers expect higher prices to hit the most essential categories of everyday expenses. Year-ahead expected price growth reached 5.5% for food, 4.8% for gas, 6.8% for rent, 7.5% for college education and 9.2% for medical care.
The Fed data line up with newly released PYMNTS Intelligence data. Our latest Consumer Expectations Index declined for a second consecutive month in September, falling 0.7 point to 54.1. Nearly all the decline came from the Macroeconomic and Buying Climate subindex, which dropped 2.2 points to 45.0. Personal Financial Resilience remained nearly unchanged at 58.3.
Buying conditions themselves fell 1.8 points.
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For retailers, data points should factor into decisions on pricing and mix heading into the holiday season. Consumers are expecting to spend more dollars, but their assessment of whether it is a good time to make a large purchase has weakened. Higher nominal spending, in other words, does not automatically translate into stronger appetite for discretionary purchases.
Job Security Offers Some Support
The labor market provides a counterweight.
The perceived probability of losing a job during the next 12 months fell to 13.5%, its lowest reading since December 2024, per the Fed data. The probability of finding another job after losing one rose 0.7 point to 46.1%, while the probability of voluntarily leaving a job increased to 19.9%. Expectations that unemployment will be higher a year from now eased to 43.9%, although they remain above their 12-month average.
PYMNTS Intelligence finds a similar divide between keeping a job and replacing one. Its personal job security measure remained high at 80.4, and perceived safety from layoffs improved to 71.9. Job mobility, however, fell 2.2 points to 46.9, below the index’s neutral level of 50.
Consumers appear relatively comfortable about the paycheck they have while remaining less certain about their options if circumstances change.
Their financial reserves provide less reassurance. PYMNTS Intelligence found that 51.8% of consumers said their savings would support their current lifestyle for three months or less if income stopped. Only 15.1% said their savings would last more than a year, a 12-month low.
The spending outlook for the fall and holiday season rests on two competing forces. Employment expectations are strong enough to support continued consumption, while higher expected prices and thinner savings leave households with less flexibility over how those dollars are allocated.
Credit offers only a partial release valve from these pressures. Consumers reported to the Fed that access to credit had become more difficult compared with a year earlier, although the perceived probability of missing a minimum debt payment during the next three months fell to 12.2%.
Holiday spending could therefore remain firm in dollar terms while becoming more selective underneath the aggregate figure. Consumers facing higher grocery, rent, medical and fuel costs have fewer dollars left after recurring expenses.
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