There are signs that consumers may be feeling a little better about the economy. sentiment rose slightly in August.
This comes after June’s record low sentiment when gasoline prices peaked.
Personal consumption accounts for a large part of gross domestic product, so how people feel about the economy matters. According to Jennifer Lee, senior economist at BMO Capital Markets, there have been mixed messages lately.
“I can’t remember a time when the economic tea we’re seeing these days was so weird.”
Lee said he was worried about inflation and the possibility of a recession. Still, the labor market held up and wage growth was strong.
“This is not your run-of-the-mill recession, where everything goes to hell,” she said.
Consumer sentiment is also mixed. Joanne Hsu, who leads the University of Michigan study, says our personal finances are doing a little better.
“Despite this improvement, consumer sentiment remains very low compared to just a year ago,” she said.
So consumers became quite moody out of anxiety. But there is some good news. “People are feeling a little optimistic about the 12-month outlook for the economy, which comes mostly from people in the lower and middle income brackets,” Hsu said.
These people are the ones whose budgets are most sensitive to inflation.
“I think we’ll soon go back to what people are paying to pump,” said Mark Zandy, chief economist at Moody’s Analytics. Nothing is fulfilling.”
Gasoline prices averaged below $4 a gallon this week for the first time since March. Zandi said the improvement in consumer sentiment, albeit weak, is a good sign.
“This suggests they may have their hands on the bunker door, but have not entered it yet,” he said.
In other words, people aren’t sitting back or dramatically reducing their spending.
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