There is a good reason why we have avoided a recession. Consumers don’t believe it will happen. And consumers drive some 70 percent of US economic activity. So their attitudes tend to make or break economic growth. When they decide conditions are worsening, they save more and spend less.
But that isn’t happening today. Consumers continue to spend into the New Year, and surveys that measure their attitudes show they feel good enough to continue to spend.
I like the Conference Board’s confidence survey that states, it “…reflects prevailing business conditions and likely developments for the months ahead. This monthly report details consumer attitudes, buying intentions, vacation plans, and consumer expectations for inflation, stock prices, and interest rates.”
And this is also reflected in their “perceived likelihood” that a recession is less likely this year.
“February’s write-in responses revealed that while overall inflation remained the main preoccupation of consumers, they are now a bit less concerned about food and gas prices, which have eased in recent months. But they are more concerned about the labor market situation and the US political environment,” said its Chief Economist Dana Peterson.
Their main concern seems caused by the primary elections and sloganeering that goes with the election season. But consumers are beginning to realize they have benefited from the record number of jobs created over the past two years.
Consumer spending is the main reason growth has been so strong. Spending was revised upward from 2.8 percent to 3 percent annually in last week’s Personal Consumption Expenditure survey.
The University of Michigan’s sentiment survey also followed by economists (and pundits) is even more upbeat.
Survey Director Joanne Hsu commented, “Consumer sentiment moved sideways this month, slipping just two index points below January and holding the gains in sentiment seen over the past three months. Expected business conditions remained substantially higher than last autumn, with short-run expectations now 63% above and long-run expectations 46% above November 2023 readings.”
Consumers seem to remain one step ahead of the pundits and pay less attention to the headlines and hysteria generated by mass media and more attention to their personal financial wellbeing.
This is a heartening sign that facts can win over fiction and consumers will keep the post-pandemic recovery alive.
Harlan Green © 2024
Harlan Green on Twitter: https://twitter.com/HarlanGreen
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