Oh boo hoo hoo:
Wealthy Americans were far better equipped to weather the pandemic recession. Yet they’re now the gloomiest as the economy continues to rebound.
While the latest data shows the US squarely on the mend, Americans aren’t feeling great about the recovery. The University of Michigan’s Consumer Sentiment Index plummeted to 61.7 from 67.2 in a preliminary February reading, according to a Friday report. That’s the lowest print since October 2011 and down 15.1 points from levels seen one year ago. Expectations for the economy also cratered to the weakest level in a decade.
The latest leg lower was entirely fueled by souring sentiments among households with incomes of at least $100,000, Richard Curtin, chief economist at the University of Michigan’s Surveys of Consumers, said. While the final February reading could show sentiment falling among other groups, the early data signals wealthier Americans are feeling the greatest pressure as the economy heals.
To be sure, they have plenty to be upset about. The stock market only partially recovered January losses in the first weeks of February and has traded with greater volatility. Since wealthy adults are the most likely to hold their cash in stocks, the market turbulence likely hampered optimism.
Soaring prices continued to drag on moods. Data out Thursday showed inflation accelerating in January to its fastest pace since 1982. One-third of surveyed adults cited higher inflation and its effect on personal finances for their weak sentiments, Curtin said. Nearly half of all adults expect their inflation-adjusted earnings to drop in the next 12 months, he added.
Americans’ inflation fears also worsened through the first weeks of February, according to the University of Michigan survey. Adults now expect inflation to trend at 5% over the next year, up from January’s reading of 4.9%. They also expect prices to climb at an annual rate of 3.1% over the next five to 10 years, well above the Fed’s target of 2% inflation.
Dwindling confidence in the government also knocked sentiments. Inadequate economic policy was mentioned by 51% of surveyed adults, according to the report, marking the largest share since 2014. Pessimism toward government policy has plagued sentiments since late 2021 when it became clear the Build Back Better plan lacked a path forward. With Sen. Joe Manchin and GOP senators still opposing the social-spending package, it’s unlikely the Biden administration approves major economic policy in the near term.
Yet the weak Friday data hint the country might need more support soon if consumers’ darkening moods lead to changes in real economic activity. The recent declines in sentiment now signal “the onset of a sustained downturn in consumer spending,” Curtin said. Spending already tumbled in December, with retail sales unexpectedly dropping 1.9% through the month despite holiday-season shopping. Worsened sentiments could lead to a prolonged drop in spending and weaken broad economic activity.
Just how deep spending slumps depends on several factors, Curtin said. Households could still have unspent stimulus cash to deploy, and the pandemic’s continued disruption to work and spending patterns could either prolong or shorten the decline. There could be a lessened need to save and a greater push toward discretionary spending if the health crisis improves, Curtin added.
The outlook for the pandemic is promising. The seven-day average for daily virus infections hit the lowest since Christmas on Thursday, and cities that first faced the Omicron variant have seen case counts drop even faster. Yet with wealthy Americans powering the latest drop in sentiment, look to stocks, not infections, for the first signs of fresh optimism.
Puhleeze. The stock market has been volatile the last couple of months but the run-up was exceptional. These spoiled people need to get a grip and STFU. They have plenty of purchasing power and if they have to cut back 5% because they’re really strapped, they can easily do that. I have no patience for this stuff anymore.