Ultimately this month, consumers aren't
really seeing a whole lot of material differences in the economic outlook
relative to last month. And we see that in the fact that
sentiment is essentially unchanged after two months of dramatic improvements.
That being said, consumers do have a positive outlook on inflation.
The both the short term and the long term expectations numbers came down a
little bit. And so I do think that consumers are not
expecting inflation to pop up again. They are expecting it to continue to
slow down. In terms of the 5 to 10 year, it's been
between 2.9 and 3.1 for the past two years.
So while it's great news that it didn't go up, it's essentially unchanged.
Joanne, is this indicative, though, of the trend we're going to see, or is this
a fluke in the numbers simply because when you look at some of the other
economic data we're getting, I'm going to push it back to the CPI numbers that
guy and I were just talking about. You are seeing this divergence.
And I'm wondering if even if we are getting this consumer data or consumers
really feeling it. Your thoughts?
So they're definitely feeling that inflation is slowing down.
And we see that in a number of places in the survey, not just been in the
expectations, but when we ask people about buying conditions for cars, for
for for durable goods and for homes, you know, they've they've noticed that that
inflation is slowing down. That being said, high prices are
continuing to weigh on consumers minds, but we still have about 37% of consumers
telling us that high prices are eroding their living standards.
So it's still hurting them in the pocketbook.
In terms of the relationship to gasoline prices.
Where were we when the data were taken? And what do you expect to happen from
here as gas prices continue to push higher?
We've the data that we released today are based on interviews throughout the
last two weeks. So.
So some you know, and there's, of course, some geographic variation in how
gas prices are going. So gas prices are going to influence
people's sentiment. But I wouldn't think I would not say
that's the only thing that's going to be pushing the inflation expectations
numbers because consumers really are thinking about prices in general.
Joanne, one of my favorite charts, I have to say on the Bloomberg terminal is
when you look at kind of consumer data or the you consumer sentiment data and
look at card spend and ordinarily they kind of track each other very closely.
To your point, if people are feeling good about the economy, they're going to
be spending more. You have seen a divergence in that kind
of data, though. Can you explain or perhaps even theorize
why that might be? Absolutely.
So consumers have been feeling really dismal about the economy since inflation
started, and that's really weighed on consumers minds.
But spending continues to be robust because of labor markets.
Consumers continue to feel very continue to feel that their income prospects are
strong. And that's precisely what is supporting
spending. So where does that leave us?
The two big threats, the financial markets, Japan and trying to figure out
right now are what do we get a recession?
If so, what kind of a recession and what what's this kind of the medium
term trajectory for inflation? If you think about those two risk, what
are your data telling us about where we are?
What the data tell us is that consumers continue to be concerned about high
prices. They are expecting inflation to slow
down. But I think the big question for
investors, for consumers and for policymakers is what's going to happen
with labor markets? Is this soft landing going to be
achieved if labor markets continue on the trajectory that they are?
I think that's great news for that's going to be great news for consumers.
It will continue to support spending, but consumers are still sort of sleeping
with one eye open and waiting for the other shoe to drop.
And if labor markets start to weaken, then all bets are off.
Joanne, I'm so glad you mentioned perhaps sleeping with one eye open,
because I think one of the things that is probably lost in this narrative is
that if the folks who are still believing that a recession is on the
table, it doesn't necessarily happen gradually.
It happens all at once, and that those kind of wave of layoffs can happen all
at once. In your expertise in this particular
survey, in that sentiment? How quickly can the data change?
The data typically are not going to plunge or spike for for no reason.
And, you know, when there are layoffs, when there are when there are slowdowns
in the labor market, even if there are well-publicized layoffs in one
particular sector, particularly like, for example, the tech sector in the last
few months, that's not necessarily going to move markets.
But, you know, over the course of several months, if there are mass
layoffs in a number of different industries, that will absolutely move
sentiment up dramatically. On that note, Labor unionisation is not
as strong as it once was, Joann, in the United States, but we're starting to see
some fairly punchy deals being delivered by the Teamsters and various other
unions. To what extent I'm curious how you think
that might fold into what you are going to see.
It's not a heavy, heavily unionized labor force in the United States in the
way that it once was, But we're seeing some fairly eye popping numbers.
Do you think those kinds of numbers from UPS into the auto sector, again, does
that give the consumer extra confidence, the kind of confidence you've been
talking about to continue spending in the way that they are?
That that will rip out into the rest of the wider economy?
So I think it's unlikely that it will ripple out to the wider economy, because
when consumers think about labor markets and think about incomes, they're
typically thinking about how it affects them.
So unless they are specifically in a unionized industry or belong to a union,
it may not affect their own income expectations.
And on the contrary, strong labor markets are seen by consumers as
something that's not actually good for businesses.
You know, if businesses are having trouble hiring people,
it can still be seen as something that's a vulnerability for business conditions.
So it will cut both ways. If it affects their own incomes at all
support it'll support spending if it's something that really jeopardises
businesses ability to to hire and retain workers, then it won't be a good thing.
