With consumers in a better mood, is the “vibecession” turning a corner?
With consumers in a better mood, is the “vibecession” turning a corner?
So, how are the vibes at your Labor Day barbecue? Any better than at the July Fourth cookout? If they are, it could be because the American consumer is in a slightly better mood. For the first time in five months, consumer sentiment actually improved in August, according to data from the University of Michigan, with consumers’ long-run economic outlook rising across age groups and demographics.
Maybe the so-called vibecession is turning a corner.
The U.S. economy seems to be getting closer to the Federal Reserve’s inflation target. Gross domestic product grew at around 3% annually last quarter, which is really good. And although the labor market is cooling, unemployment is still historically pretty low. So that whole consumer vibecession thing has gotta be over by now, right?
Kayla Bruun, an economist at Morning Consult, said actually, it’s not.
She said even though consumers feel a little better with inflation closer to 2%, they still fondly remember their lower grocery bills of 2019.
“Consumers are very fatigued by prices and it is that inflation component that’s really been driving the vibecession, and consumers are not over that,” she said.
And the uptick in consumer sentiment we’re seeing?
Joanne Hsu at the University of Michigan said it’s mostly coming from folks who are rich enough to absorb higher prices — or play in the stock market.
“Folks at the top of the income distribution, their sentiment, their vibes, have improved really, really strongly since mid-2022,” she said.
Of course a key reason we pay attention to these sentiment numbers is they’re supposed to provide clues to consumer spending.
But Olu Sonola at Fitch Ratings said vibes have been low and spending has been high for a while. “It’s completely disconnected, completely. There’s no correlation,” he said.
Sonola added that he doesn’t see vibes dramatically bouncing back anytime soon.
With “cumulative inflation, political polarization and a labor market that’s weakening, you know, the vibecession will be quite weak for some time to come,” he said.
What a bummer. Maybe I’ll go buy something to make myself feel better.
Stories You Might Like
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
