Economists have been grappling with this question for months disconnect The relationship between how well the economy is doing and how poorly people feel about their financial situation.
Now, there is evidence that the so-called “Weiwei inheritanceMichael Pierce, deputy chief U.S. economist at Oxford Economics, said, “It may be that the long-term negative sentiment toward the economy appears to be ending.
As inflation cools Fed Prepare to lower interest rateAmericans’ assessment of the future is improving, bringing the country’s economic conditions more in line with consumer sentiment, Pierce wrote in a report released Friday.
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Other economists also pointed to an optimistic outlook for the near term.
“Consumer confidence seems to be catching up with economic conditions,” said Brett House, an economics professor at Columbia Business School. “They’re kind of meeting in the middle.”
However, Pierce wrote in the report that it was difficult to determine what caused the change in mood.
“Our leading candidate will be a delayed reaction to news that inflation has eased and appears to be on track to fall back to 2%,” Pierce wrote. “It may also reflect the growing interest in the Fed now that it is on a clear path to lower rates. Optimism about the future has increased.”
Laying the groundwork for the Fed to cut interest rates
Recent economic data has paved the way for the central bank to lower its benchmark interest rate for the first time in years.
The personal consumption expenditures price index, the Fed’s preferred inflation gauge, showed an increase Annual growth of 2.5% July. And, despite unemployment rate It’s still at a low of 4.2%, but has been trending upward over the past year.
Greg McBride, chief financial analyst at Bankrate.com, said: “All signs point to continued progress in inflation, with pressures expected to ease further with Wednesday’s release of the Consumer Price Index for August. “
“Other inflation measures — the personal consumption expenditures index and unit labor costs — tell the same story and set the stage for the Fed to begin cutting interest rates this month,” he explained.
According to the CME Group’s FedWatch Indicator, markets are now pricing in a 100% chance that the Fed will begin cutting interest rates at its Sept. 17-18 meeting, with the possibility of more aggressive moves later this year. measures.
“Achieving the long-awaited soft landing”
at the same time, consumer spending According to the latest data, it’s doing even better than expected.
“The U.S. consumer has remained resilient,” Jack Kleinhenz, chief economist at the National Retail Federation, said in the September issue of NRF. monthly economic reviewreleased on Friday
Kleinz said the U.S. has avoided a recession despite early expectations of one.
“The U.S. economy is clearly not in recession and is unlikely to be in recession in the final stages of 2024,” Kleinz said. “Instead, the economy appears to be on the verge of a long-awaited soft landing, with growth and inflation cooling simultaneously.”
Colombia’s House of Representatives said inflation progressed without a major deterioration in the labor market, creating a “classic Goldilocks scenario.”
Although, as CNBC’s Bob Pisani recently put it, there is still a group of “declinist“They have been insisting that the economy will slow down significantly. However, fewer economists now think this will happen in the short term. Goldman Sachs recent Greatly reduces the probability The economy improved from 15% to 20% and then fell from 25% to 20% soon after.
“The tide is very crowded in 2023 and for good reason, but the likelihood of a soft landing has continued to increase over the past 12 months,” McBride said.
Officially, the National Bureau of Economic Research recession defined “Economic activity has declined significantly, across the economy, and lasting for more than several months.” The last time this happened was in early 2020, when the economy suddenly came to a halt.
Over the past century, there have been more than a dozen economic recessions, some lasting as long as a year and a half.
“The recessionists will eventually be right”
“Of course, the problem with recessionists is that they’re always right some of the time,” House said. “It is true that at some point in the future, the U.S. economy will enter a recession.”
since berlin wall fallsSome kind of economic disruption or adjustment is already happening with fairly predictable regularity, House said. Now, the upcoming U.S. presidential election and the prospect of major policy shifts are adding to the uncertainty.
“The recessionarians are ultimately right, but if it comes in a few years, there’s no victory,” House said.
