Americans’ sentiment about the economy is more pessimistic than at any time in the past seven decades, according to the University of Michigan’s most recent Survey of Consumers.
“Consumers across income, age, education, geographic region, political affiliation, stockholding and homeownership status all posted large declines,” Survey of Consumers Director Joanna Hsu said in a statement, per CNN. “About 79% of consumers expected bad times in the year ahead for business conditions, the highest since 2009.”
The influential survey has seen a significant decline beginning in the spring of 2021, when inflation started to rise beyond the roughly 2% level seen over the last few decades. As of May, the Consumer Price Index (CPI) has risen 8.6% year-over-year — the highest inflation rate witnessed since the 1980s.
“As higher prices become harder to avoid, consumers may feel they have no choice but to adjust their spending patterns, whether through substitution of goods or foregoing purchases altogether,” Hsu added. “The speed and intensity at which these adjustments occur will be critical for the trajectory of the economy.”
To contend with skyrocketing inflation, the Federal Reserve increased interest rates earlier this month by 0.75% — the largest rate hike increment since 1994. The central bank already hiked rates by 0.5% in May — the largest such increase since 2000 — after a 0.25% rate hike from near-zero levels in March. Interest rates are now at 1.5% to 1.75%, with more increases likely on the way.
Fears of a recession have gripped American consumers and businesses. Last week, a bout of stock market selloffs caused the Dow Jones Industrial Average and the Nasdaq Composite to fall 4.8%, while the S&P 500 was down 5.8% — marking its worst week since 2020, according to CNBC.
President Joe Biden, however, said in a recent interview that a recession is by no means “inevitable” and told Americans to wait before concluding that economists’ forecasts are true.
“They shouldn’t believe a warning. They should just say: ‘Let’s see. Let’s see which is correct.’ And from my perspective, you talked about a recession. First of all, it’s not inevitable,” Biden told Associated Press reporter Josh Boak before pointing to a survey taken last year to allege that households have robust savings.
Meanwhile, Biden has deflected on the issue of rising price levels, claiming that “Putin’s Price Hike” — a reference to the Russian invasion of Ukraine and its role in soaring global energy costs — is the primary pressure behind inflation.
“High gas prices at the pump, energy, and food prices accounted for around half of the monthly price increases, and gas pump prices are up by $2 a gallon in many places since Russian troops began to threaten Ukraine,” Biden said. “Even as we continue our work to defend freedom in Ukraine, we must do more — and quickly — to get prices down here in the United States.”
When questioned by a recent Harvard survey about rising price levels, 95% of respondents said that inflation is “very serious” or “somewhat serious.” A plurality — 47% — said that the Biden administration is responsible.