![]() We tend to think the future is going to be similar to the present," he said. "Generally, people are pretty short-sighted. ![]() Loewenstein also said that a "recency bias" is most likely at play. "It's financially eviscerating," Zandi said. It's because it's in their face all day long."Įven though Americans' gas costs as a share of income are below where they have been at points in the past when adjusted for inflation, paying more stings with every fill-up. "Economists are always confused by how outsized a role gas prices play in people's economic thinking. "You can't overstate how debilitating $5 a gallon is," he said. Zandi pointed to the price of gas as a particular flash point. "Everyone seems to feel like we're on a knife edge." "I think part of what's going on is there are certain parts of consumers' budgets they don't have much control over," said George Loewenstein, professor of economics and psychology at Carnegie Mellon University. One trigger for our collective malaise could be a feeling of powerlessness, experts say. "Sentiment has been a poor guide to spending recently people with more than $2 trillion in aggregate excess savings might say they are miserable, but they can still go shopping," Pantheon Macroeconomics chief economist Ian Shepherdson pointed out in a recent research note. Retail sales rose in May, likely reflecting the increasing rate of inflation - and the continued ability of consumers to spend.Īlthough the personal savings rate has dropped significantly from its pandemic peak of 24.8% in May 2020, it remained at 5.4% two years later, and household balance sheets are still relatively strong. ![]() University of Michigan data showed that consumer sentiment tumbled to a record low between May and June, but - perhaps surprisingly - that hasn't translated to a widespread pullback in spending. The Conference Board's Leading Economic Index reversed earlier gains and fell in the first half of 2022, signaling that near-term recession risks have grown, the group said. "The sentiment is consistent with a very nervous consumer." "People have been put through the wringer these last two years," said Mark Zandi, chief economist at Moody's Analytics. With all of this head-scratching by the experts, it's no wonder ordinary Americans are feeling anxious, exhausted or dispirited - or all three. "I think we understand better how little we understand about inflation," he said. On Twitter, Glassdoor senior economist Daniel Zhao called the disconnect between the rising number of people newly filing for unemployment and the almost static number of ongoing claims "weird."įederal Reserve Governor Christopher Waller called the disparity between growing employment and shrinking output "odd," and the divergence of income and output data "a puzzle" in a recent webinar.Įven Federal Reserve Chair Jerome Powell sounded somewhat baffled in a central banker economic forum in Portugal last month. The economy zigged when it was supposed to zag, and even the professionals are searching for answers. Consumers are pessimistic about what lies ahead, but they keep spending. Companies are hiring, but output is dropping.
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