Dive Brief:
- Consumer expectations for inflation in a year jumped to 3.4% in March, with households anticipating that the price of gas will surge by 9.4% in the next 12 months, the Federal Reserve Bank of New York said Tuesday in a survey report.
- Consumers do not expect pay gains to ease the pain from price pressures. The median expectation among consumers for wage growth fell 0.1 percentage point last month to 2.4%, at the bottom end of the range since May 2021, the New York Fed said.
- Rising inflation may inhibit consumer spending, Federal Reserve Bank of Chicago President Austan Goolsbee said Tuesday. “My concern at this immediate time is that we've got to get our heads around an oil shock, which is going to drive up prices in a stagflationary way,” he said. “There's heightened anxiety about this cost aspect and inflation coming back,” he added.
Dive Insight:
Small businesses, which employ 46% of U.S. workers, rank inflation as their top concern and hold a gloomier view of the economy than before the outbreak of war with Iran on Feb. 28, the U.S. Chamber of Commerce said Tuesday, reporting on results of a first quarter survey.
Price pressures rose Tuesday as President Donald Trump threatened to eliminate Iranian civilization if Tehran fails to open the Strait of Hormuz and other demands by 8 p.m. Eastern Time.
“A whole civilization will die tonight, never to be brought back again. I don’t want that to happen, but it probably will,” Trump wrote on Truth Social.
Uncertainty from the war “is clearly weighing on confidence” among small business owners, Neil Bradley, the chamber’s executive vice president, said Tuesday in a statement.
Sentiment among small businesses declined for the second straight quarter, with the chamber’s confidence index falling to 67 from 68.4 during Q4 and from its recent high of 72 during Q3 2025, the chamber said.
“Views of the national and local economies have turned more pessimistic, concerns over inflation have jumped and plans for future hiring and investment dropped markedly,” Bradley said. At the same time, business owners say their “operations remain stable,” he added.
Rocketing gasoline prices have jarred both small business owners and consumers since the outbreak of war on Feb. 28.
The average price for a gallon of gasoline has surged about 39% since U.S. and Israeli warplanes began strikes on Iran – from $2.98 to $4.14, according to AAA.
Consumers are less alarmed about inflation beyond 12 months in the future, according to the New York Fed. Their median expectation for inflation in three years rose just 0.1 percentage point last month to 3.1%, while their expectations for inflation five years in the future held steady at 3%.
Household perceptions about their current financial situations compared with a year ago deteriorated, with a larger share of households reporting a worse financial situation and a smaller share of households reporting improvement, the New York Fed said.
Year-ahead expectations about households’ financial situations also declined, with the share of households expecting a worse financial situation hitting the highest level since April 2025, according to the New York Fed.
