Consumer Sentiment Craters

One of the most important things the Fed watches to help them decide if they should raise or lower interest rates is consumer sentiment. Since those rate changes affect just about every big money decision we make, we should probably keep an eye on it, too. So what’s it doing lately?

Here are Five Fast Facts on recent consumer sentiment moves:

  1. 🔍 What Is It - Consumer sentiment is a measurement of the overall health of the economy based on a survey of consumer opinions. It looks at how people feel about their current financial situation, the short term economy, and the long term outlook. Warm fuzzy or cold prickly? YOU decide!
  1. 📉 What Happened - The May numbers came out recently and consumer sentiment dropped by about 10% from last month, to the lowest it’s been in the last six months. In fact, it’s the biggest monthly drop in almost three years! People apparently think the economy sucks, both for them and for everyone else.
  1. 😥 The Biggest Concerns - Consumers are very concerned about inflation, and think it’s only going to get worse. They also think unemployment and interest rates are going to keep moving in the wrong direction.
  1. 🤔 The Experts Say - Experts are confused. They say that the economy is actually hunky-dory, and they’re not sure why people have concerns. Of course, those experts probably get paid a helluva lot more than most normal folks who actually know what it costs to buy groceries and gas nowadays.
  1. 😡 Normal Folks Say - Consumers blame inflation for driving up the cost of everything. Also, the crazy housing market – not enough houses available plus stupid high interest rates – have pushed mortgage balances to well over market value, meaning home values are underwater so people couldn’t sell and move even if they wanted to. When you’re worried about paying the grocery and gas bill AND losing your home…hm, why do we think people are concerned?

🔥Bottom line: With concerns about basic necessities, people are putting off major purchases and bracing for tough times. This has serious follow-on effects to just about every other area of spending, so it could very well trigger an overall slowdown of the economy. With inflation still refusing to go away, it’s a potentially disastrous combo. Let’s hope the Fed and the experts get this one right.

What are your biggest economic concerns right now?

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