Last Friday, the University of Michigan released its preliminary consumer sentiment survey for April, which showed US shoppers becoming gloomier. One headline read: “Consumer sentiment hits second-lowest reading on record” and reported that “The reading was just shy of the all-time low of 50 seen in June 2022.” That seems unimaginable, considering the shocks felt in 2020 with the shutting down of the economy during Covid, or the bank failures that tore up the financial system in 2008.
The survey authors report that anxiety over tariffs was “top of mind”, along with concerns about inflation. Astonishingly, we read that “Pessimism over the inflation outlook soared again as one-year inflation expectations jumped to 7.3% — the highest since 1981 — from 6.5% the month prior. Just four months ago, consumers had expected inflation of 3.3% over the next year.”
Also: “Long-run inflation expectations, which track expectations over the next five to 10 years, also climbed, hitting 4.6% in May, up from 4.4% in April.”
Do U.S. consumers really see inflation skyrocketing to more than 7%? Remember that during the peak of Bidenflation, in 2022, the rate peaked at 9.1% before trending down. Gasoline prices at that time rose to more than $5 per gallon for the first time and the cost of everything was boosted by trillions of excess dollars flooding a fast-growing and supply-constrained economy.
None of those things is happening now. “Gas prices are set for their cheapest Memorial Day since 2021” says CNN; today the average US price is $3.18, and the latest CPI reading showed prices advancing 2.3% over last year. Yes, spending is still way too high, but the surge that occurred post-Covid was a one-off.
What consumers are worried about is the impact of tariffs, with – let’s be honest – outlets like Bloomberg and CNBC delivering daily doses of pessimism about how Trump’s effort to rebalance trade is going to drive prices higher and the economy into the tank.
Tariffs can lead to higher prices as companies pass through cost increases (see: Walmart) but energy prices remain low and so far we have not seen a large number of companies pushing through price hikes. If that happens, the jump is unlikely to reach anything close to 7%.
Another group that monitors consumer sentiment, Morning Consult, shows quite a different picture, with a recent reading of 98.5, down from 103 on inauguration Day, but still higher than at any time since 2021, the earliest days of the Biden presidency. In other words, despite all the fear-mongering and hysteria over everything Trump, people are still more upbeat than they were under Biden. The folks at Morning Consult argue their data is more up to date, and that while there was some softness during the period tracked by UMich, May has seen increased optimism.
They also report an uptick in Trump’ approval, now at 48%. BTW, that compares to 42% in the latest NY Times poll.
The liberal media is resolutely anti-Trump; they want him to fail. If you listen to the folks at Bloomberg, the antipathy is almost laughable. The sad reality is that a constant barrage of negativity can sour the public on our leaders, and on policies. As Morning Consult reported, “Over the [past] weekend, nearly every major financial news publication ran stories about a recent plunge in consumer sentiment.”
Between that bad news and the Moody’s downgrade, the financial press was primed for a disastrous day in the markets yesterday. That didn’t materialize, much to their chagrin, but make no mistake, if they try hard enough, the media can and will drive us into recession.
