An economic muddle
Inflation rose to 7% last month, highs last seen in 1982. This has markets on edge and consumers far less bullish than they were in summer 2021, before the fallout from the Delta and Omicron variants.
Yet the overall picture is one of mixed signals. Right now, consumer outlook is still depressed relative to pre-pandemic levels, while optimism about the future of the economy is tracking downwards. At the same time, we’ve not yet seen as steep as reversal as we did in early 2020, although some groups are more confident than others.
That’s because the economic rebound, such as it is, hasn’t reached everyone equally. Below, a closer look at current economic sentiment in the US.
- Social or pandemic malaise? Consumer sentiment reflects this general confusion. Since late summer, there’s been lots of volatility but no clear direction. Taken together, consumer confidence is in a holding pattern. Worse than before the pandemic, but still better than the darkest days of the 2020 lockdowns. COVID rules still apply.
- Economic retrospective. Overall, a plurality feel that their financial situation is no better or worse than it was at the start of the pandemic. But look a little closer and differences become apparent across different income brackets. The before was better than now. COVID’s impact again.
- Inflation ahead. There are other warning signals. As Americans look to the next year, most expect inflation—which is already historically high—to keep climbing or to flatline. Few expect that it will be easier to pay the bills. America is not inflation ready—expect behaviors to change given the risk.
- Spending strong. Although consumer sentiment is still in a somewhat delicate place, spending keeps going up. With the normal flow of daily life ground to a halt, many Americans were able to set aside new cash reserves. However, available data show that wealthier Americans were able to stockpile more, and that those excess savings may be running out for lower income Americans. Again, only in our COVID world can sentiment be down and spending up. COVID rules again.
- Disparate impact. To the point above, our economic tracking data underscores how differently Americans experienced the economic recovery, depending on their income bracket. While everyone started out the pandemic in a similarly bad spot, wealthier Americans regained their footing faster and are more likely to have held onto it despite recent economic vicissitudes. This is our tale of two Americas.
Again, the economic context today is one of mixed messages and unease. It’s too early to say where things are headed, but one thing is clear. COVID rules still apply to our world—what is up is down and what is down is up. Welcome to 2022.
