Experts say the economy is improving, but consumers don't feel the same way. Here's why. • Ohio Capital Journal

Americans are still worried about their financial stability even as their recession fears ease. Consumers' memories of high grocery prices and pre-pandemic budgets may play a role. Here's what financial and economists are saying about what this week's economic indicators tell us about the public's view of the economy.

What drives consumer confidence?

Consumer Confidence Index, Published The Conference Board, a business nonprofit and research firm, is a survey that indicates how optimistic or pessimistic consumers feel about their financial well-being and the economy.

The consumer confidence index fell to 104.7 from 104.8 in March, below some economists' expectations. 106.5. While consumer sentiment about the likelihood of a recession eased this month, consumers are less confident about their household's financial situation over the next six months. The percentage of consumers expecting incomes to fall rose to 13.8% in March from 11.9% in February.

Elizabeth Pancotti, director of special initiatives at the Roosevelt Institute, said consumers' experience of the economy and their financial situation may come down to crises that hit their budgets particularly hard, not showing up at the macro level.

„The last time egg prices go down and chicken prices go down, orange juice is high because of some random citrus greening disease or some other shocking food item, your total grocery bill doesn't go down, it really highlights that,” he said. said. „There's been one crisis after another at a micro level, and I think that's why we're not seeing the difference between overall economic strength and the sentiments of the average consumer at a very micro level.”

Pancotti acknowledged that housing is a high cost for consumers right now, and those prices don't show as much movement as other parts of consumers' budgets.

„For most families, this is the largest purchase they make each month,” he said.

Why isn't consumer sentiment high?

Consumer Sentiment, a short survey conducted by the University of Michigan, also measures people's feelings about the overall economy, the labor market and how they view inflation. On Thursday, U.S. consumer sentiment rose to 79.4 from 76.9 in February and 62 a year earlier, making it its highest reading since July 2021.

The figure is a sign that consumers believe the economy is „steady,” the survey's director, Joan Hsu, said in the report.

„As the election season progresses and debates about economic policy become more important to consumers, their outlook for the economy will become more volatile in the coming months,” he added.

Kevin Gleason, a business economist and research officer at the Federal Reserve Bank of St. Louis, said consumer confidence and consumer sentiment are well below pre-pandemic levels and why the economy is „growing so strongly” is a puzzle. In the last one and a half years. But like Pancotti, higher prices at the store compared to pre-pandemic prices may play a role in those moves, he said.

„If you're like me, you look at something and say, 'Oh my gosh. I remember it was pretty low before the pandemic. So I think it's calling into question a lot of people's perceptions of the overall state of the economy and, essentially, their consumer finances,'” he said.

Inflation and what can we expect from the central bank?

Economists are watching PCE closely for signs that the central bank will cut rates in the coming months, as the Federal Reserve watches its preferred measure of inflation, the personal consumption expenditures price index. This policy change is expected to have consequences Home sales market As well as development of industries.

PCE rose 0.3% from January to February and 2.5% over the past year. According to Friday release from the Bureau of Economic Analysis. Fed President Jerome Powell responded to the news while speaking at the San Francisco Fed said The numbers were „in line with expectations,” but not as reassuring as the numbers central bank officials saw last year.

Despite Powell's welcome, some financial experts believe inflation will soon ease. Christian Diu, associate professor of finance at the University at Buffalo, said even if the economy adds jobs, he doesn't believe it will. The quality of those works This price is high enough to sustain growth in the long run.

„Consumer goods prices can't always be raised fundamentally by the top of the wage distribution alone. The rest of the wage distribution actually looks pretty flat. So I don't think these price increases are really sustainable,” Diu said.

For this reason, he does not think the central bank should continue to put the brakes on the economy through restrictive monetary policy. Tiu added that inflation was partly driven by corporate profit-seeking by companies. using inflation They have to keep raising prices more than they justify to American consumers.