Survey finds consumers feel a little better about the economy
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There’s a sign that consumers may be feeling a little better about the economy. Sentiment ticked up slightly in August, according to the University of Michigan’s monthly survey of how consumers feel about their personal finances and overall economic conditions.
That comes after record low sentiment in June — when gasoline prices hit their peak.
Consumer spending makes up the bulk of gross domestic product, so it matters how people feel about the economy. Lately, there have been a lot of mixed messages, according to Jennifer Lee, senior economist with BMO Capital Markets.
“I cannot remember a time when it was so strange, the economic tea leaves that we’re seeing these days.”
We’ve got inflation and talk of a potential recession to worry about, Lee said. Yet the labor market is holding up, and wage growth is strong.
“It’s not like your garden-variety recession, where everything is going to hell in a handbasket,” she said.
Consumer sentiment is also a mixed bag. We’re feeling a little better about our personal finances, said Joanne Hsu, who directs the University of Michigan’s survey.
“In spite of this improvement, consumer sentiment remains extremely low relative to even just a year ago,” she said.
So, the consumer went from anxious to still pretty cranky. But there’s some good news: “People are feeling a bit more optimistic about the 12-month outlook for the economy, and this is largely coming from people with low and middle incomes,” Hsu said.
Those are the people whose budgets are most sensitive to inflation.
“I think it goes right back to what people are paying at the pump,” said Mark Zandi, chief economist at Moody’s Analytics. “Nothing plays a bigger role in shaping the collective psyche than the price of a gallon of gasoline.”
Gas prices, on average, dipped below $4 a gallon this week for the first time since March. Right now, Zandi said, even weak but improving consumer sentiment is a good sign.
“That suggests they may have their hand on the bunker door, but they haven’t gone in yet,” he said.
In other words, people haven’t hunkered down and pulled back dramatically on spending.
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