Watch What Consumers Do, Not How They Feel
Sentiment about the US economy has been improving, but the more reliable indicator is Americans’ ability to spend.
Hard evidence of consumer sentiment.
Photographer: Al Drago/Bloomberg
Over the past few years, even as they have been gritting their teeth and complaining about higher prices, consumers have been fueling US economic growth. Now their pandemic savings are gone and the labor market is cooling off, raising the question: How much will the economy slow down?
First, two points: One, economic growth has shocked repeatedly on the upside, beating expectations for growth quarter after quarter since the pandemic recovery began in 2020. The economy is bigger today than forecasters such as the Congressional Budget Office predicted even prior to the pandemic. Two, households entered this year with more consumer purchasing power than they had prior to the pandemic.