Economic Pessimism In US Disproportionate To Economic Performance

The Financial Times has published analysisof voter views on the US economy and data on the actual performance of the economy, concluding that: “Disproportionate doom seems to be a new American affliction.”

• The analysis suggests that the White House continues to have a major problem communicating to voters the relative strength of the US economy, with voter perceptions of the economy largely driven by partisan affiliation.
• FT reports: “Relative to the eve of the pandemic, US consumers now appear gloomier than the French, the Germans and even the British. The Europeans all feel about as confident as one might expect based on how their economies are performing.”
• According to polling commissioned by FT, “Americans are consistently wrong in the negative direction on almost every measure we polled. By huge margins, they believe inflation is still rising (it’s falling), that it has outstripped wage growth (wages have outpaced prices), and that they have become less wealthy (they’ve become much wealthier).”
• FT concludes that sentiment more closely tracks with partisan affiliation than with experience, arguing that more accurate consumer sentiment can be seen in spending patterns: “My advice: if you want to know what Americans really think of economic conditions, look at their spending patterns. Unlike cautious Europeans, US consumers are back on the pre-pandemic trendline and buying more stuff than ever.”

Figure 1: Consumer Confidence Index vs “What We Would Expect Based on Economic Indicators”

Source: FT