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US consumer confidence slides to lowest level since 2022
Insights from The Wall Street Journal, The New York Times, and Project Syndicate
The News
US consumer confidence fell for the third straight month as Americans remain skeptical about the jobs market and the overall state of the economy. The consumer confidence index fell in April to the lowest level since mid-2022, coming in below what economists expected.
“Elevated price levels, especially for food and gas, dominated consumers’ concerns, with politics and global conflicts as distant runners-up,” said Dana Peterson, chief economist at The Conference Board, which runs the consumer confidence polling.
Despite Americans’ pessimism about the state of the economy, paychecks grew in the first quarter, according to the Labor Department’s employment cost index, which measures wages and benefits, released Tuesday. The bump in wages raised renewed inflation jitters among investors, sending the stock market sliding.
Tomorrow the US Federal Reserve will announce whether it is cutting interest rates, which remain at their highest level in more than two decades, with the benchmark rate currently around 5.3%. Stronger-than-expected inflation is expected to lead the Fed to hold off on long-anticipated rate cuts.
SIGNALS
Wealthy Americans drive spending despite the Fed’s push to cool price growth
Despite two years of high interest rates designed to cool stubborn inflation, consumer spending remains high and unemployment is historically low. With economists grappling with why price growth has yet to slow, part of the answer is that many wealthy, property-owning Americans have yet to feel the squeeze as they locked in mortgages at lower interest rates before the recent hikes, The New York Times reported. Gains in the stock market and housing prices have only encouraged richer, older Americans to spend more, driving economic growth and contributing to ongoing inflation woes, according to The Associated Press. Americans aged 65 or older were responsible for nearly 22% of consumer spending in 2022 — the highest figure since 1989, the outlet reported, citing the most recent data on record.
Higher-than-expected inflation frustrates hopes of soft landing
While economists were initially optimistic that the Fed would cut interest rates several times this year, the growing consensus is that the central bank is likely to delay cuts in an effort to stamp out persistent inflation. While many economists were quick to celebrate the US Federal Reserve steering the economy towards a soft landing after the pandemic, “the plane has not landed yet,” Michael R. Strain of the American Enterprise Institute wrote. JPMorgan Chase CEO Jamie Dimon told The Wall Street Journal that “The odds of a soft landing, the market kind of prices in 70%. I think it’s half of that.”
