Americans’ attitudes toward the economy hold steady despite disappointing inflation reports
By Bryan Mena, CNN
Washington (CNN) — Americans haven’t felt any better about the economy these past few months, but they haven’t felt any worse either. That’s striking because disappointing inflation reports have thrown Wall Street into a tailspin.
The University of Michigan’s latest consumer survey showed that sentiment largely held steady in April, according to a preliminary reading, edging lower to a reading of 77.9 from 79.4. Sentiment is well above the record lows seen in the summer of 2022, when inflation reached 40-year highs, though it remains below pre-pandemic levels.
“Sentiment moved sideways for the fourth straight month, as consumers perceived few meaningful developments in the economy,” said Joanne Hsu, the university’s Surveys of Consumers director, in a release.
“Overall, consumers are reserving judgment about the economy in light of the upcoming election, which, in the view of many consumers, could have a substantial impact on the trajectory of the economy,” she added.
Meanwhile, US consumers’ expectations of inflation rates remains mostly in check, ticking up only slightly in April. The Federal Reserve cares whether or not Americans have faith that inflation will eventually return to levels they’re used to. Still, firmer-than-expected inflation readings did have some impact on Americans’ perceptions, albeit modest.
“Greater dissatisfaction with the pace of disinflation weighed on consumers’ assessments of current and future economic conditions. This is partly due to higher gasoline prices, but also the slower broader progress as seen in the recent CPI reports,” Oren Klachkin, financial market economist at Nationwide, said in a note Friday.
Fading hopes for Fed rate cuts
At the end of last year, investors were full of hope that the Fed would end up cutting rates as many as six times in 2024, starting in March. Then the Consumer Price Index for January came in hotter than expected, triggering a selloff that week and pushing back the market’s expectations for the first rate cut.
It was the same story for February’s CPI. Then it happened again this week for the March report. Consumer prices were 3.5% higher in March from a year earlier, a much bigger increase than February’s 3.2% and above what economists were forecasting. On a monthly basis, consumer prices rose 0.4%, also above expectations.
That sent a shiver up Wall Street’s spine. Stocks dropped sharply after the March CPI was released Wednesday as bond yields spiked to the highest level since November. Major Wall Street banks also recalibrated their forecasts on rate cuts.
Goldman Sachs now estimates that the first rate cut will come in July, instead of June; and Bank of America now expects the first cut in December instead of June.
“We continue to expect cuts at a quarterly pace after that, which now implies two cuts in 2024 in July and November,” Goldman Sachs’s chief economist, Jan Hatzius, said in a note.
The economy is coming into focus
Everyday Americans, on the other hand, haven’t fretted about progress on inflation potentially stalling. Still, they’re not feeling any peppier about it, either.
Pessimistic moods about the economy have been a persistent headache for President Joe Biden as he campaigns for reelection. Biden is preparing a campaign swing through Pennsylvania next week to make his case for voters on how he plans to tackle economic issues.
Biden kicks off his tour through the state Tuesday with a major speech on the economy in his hometown of Scranton, Pennsylvania, campaign officials told CNN.
“The address will drive home a simple question: Do you think the tax code should work for rich people or for the middle class?” a campaign official told CNN. “The president has made it clear what he thinks the answer is, and so has Donald Trump.”
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