Data shows consumers souring on the US economy
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Data indicates that economic pessimism is, as Mugatu would say, so hot rn. US consumer sentiment fell last month to its lowest level since November, as shoppers grew more worried about persistently high inflation, according to the latest University of Michigan survey of consumers.
By the numbers: On a month-to-month basis, the US consumer sentiment index fell 13% in April, marking the biggest drop since mid-2021. And it seems everyone was munching on economic Lemonheads: The monthly decrease was seen across all age, income, and education groups, as well as political party affiliation.
- Additionally, Americans’ expectations for future inflation rose for both the one-year (3.5%) and five-year (3.1%/year) periods included in the survey.
- Chicago Fed President Austan Goolsbee said the data “bodes awful for progress on inflation,” but added that investors still believe the central bank will succeed in bringing inflation back down to its 2% target.
The report came as a surprise to many economists. Experts had predicted US consumer sentiment would decrease by ~1.5% in April – instead of the 13% decline in reality – since the report came as the stock market is riding a strong rally, gas prices are holding somewhat steady, and the unemployment rate remains historically low at 3.9%.
But the writing may have been on the wall. There have been a growing number of signs in recent weeks that American consumers, particularly those with lower incomes, have begun to pull a Fat Joe and lean back.
- McDonald's, Starbucks, KFC, Pizza Hut, 3M (maker of Scotch tape and Post-it Notes), and Newell Brands (Coleman and Rubbermaid), all revealed on recent earnings calls that they’re seeing consumers be increasingly cautious with discretionary spending.
👀 Looking ahead… Walmart and Home Depot both report earnings this week, which should include insights as to how US consumers are holding up, while the April Consumer Price Index will be published on Wednesday alongside US retail sales data.
📊 Flash poll: To all US consumers: which letter grade would you assign to the current state of the US economy?
See a 360° view of what media pundits are saying →
Sprinkles from the Left
- Some commentators argue that the US economy is slowly approaching dangerous waters due to a combination of slower disinflation in recent months and the approaching November elections, which will influence how the public interprets any Fed rate cuts.
- Others contend that the US economy has shifted in recent weeks from expecting lower future inflation to the exact opposite, placing responsibility on Fed chair Jerome Powell to make it clear to the public which direction the Fed expects the economy to head.
- “Inflation’s Last Mile Will Test the Fed” –Bloomberg Editorial Board
- “The radical repricing of US interest rates” –Financial Times Editorial Board
- “Immigrant workers key with boomers retiring and U.S. birthrates falling” –Catherine Rampell, WaPo
Sprinkles from the Right
- Some commentators argue that the US economy is being supported by three shaky pillars – over-the-top government spending, an overly concentrated stock market, and unprecedented illegal immigration – with the result being flagging growth, volatile stocks, declining consumer confidence, and pressure on unskilled wages.
- Others contend that the Biden administration has indeed presided over a low unemployment rate and robust job market – but Biden’s policies have also succeeded in pushing inflation to 40-year highs, doubling interest rates, and slowing economic growth.
- “Will the economy slow or fall off a cliff?” –Liz Peek, The Hill
- “Less than rosy economic numbers dog Biden” –Las Vegas Review-Journal Editorial Board
- “Don’t Be Misguided by an Economics of Nostalgia” –John Gustavsson, National Review
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