Christopher Thornberg’s Post

A new commentary from Founding Partner Christopher Thornberg helps to pinpoint the reason why low consumer sentiment has persisted against an economy that is doing enviously well. Americans’ views of the U.S. economy have lost touch with the data reality and the commentary includes a statistical regression of consumer confidence to zero in on the specific reason why. Yup, it's inflation. Basically, we care a lot more about changes in the prices of things than about changes in the quantity of things we are actually consuming. https://lnkd.in/gAJxmVKV

It’s Still The Economy Stupid Americans remain relatively pessimistic about the current economy, and have grown increasingly worried about inflation. These economic themes remain the most important concerns as the presidential election draws closer. All of the surveys are demonstrating this in a consistent fashion. Americans are also growing more pessimistic about their personal finances, even though they are still earning incomes because the labor market are fully employed. The economy is the number one issue today, and that is likely to have a meaningful effect on the presidential election in November. Read more about it in this month's newsletter! https://lnkd.in/gZY8smNW

Yep...what he said! #economics101 "Many Americans believe that the economy and their finances are worse than they really are. In The Wall Street Journal's latest poll of swing states, 74% of respondents said inflation has moved in the wrong direction in the past year. This assessment, which holds across all seven states, is startling, sobering—and simply not true. I’m not stating an opinion. This isn’t something on which reasonable people can disagree. If hard economic data count for anything, we can say unambiguously that inflation has moved in the right direction in the past year. In the 12 months through February, inflation, according to the century-old consumer-price index, was 3.2%, compared with 6% a year earlier. Use a slightly different time horizon, or a slightly different measure (such as the index the Federal Reserve prefers) and you get similar results. Take out food and energy—or for that matter look only at food and energy—and inflation is still down. Yes, some individuals faced higher inflation (someone who bought a house, for instance) but, for the average person, inflation went down. Yet the average person thinks it went up. When it comes to the economy, the vibes are at war with the facts, and the vibes are winning. This is obviously bad news for President Biden’s re-election hopes. He can’t exactly tell voters that they are wrong; he would be called out of touch. And it probably wouldn’t change anything. The vibes seem symptomatic of a broader pessimism disconnected from the data. It’s tempting to chalk this up to a misunderstanding. Lower inflation means the level of prices is still rising, just more slowly than before. People sometimes conflate inflation with the level of prices and believe inflation is getting worse because the price level keeps going up (it rarely goes down). A recently released The Brookings Institution study by Harvard University economist Stefanie Stantcheva sheds light on exactly how people think and feel about inflation. It found that half of respondents defined inflation correctly, as rising prices. The other half defined it incorrectly, mentioning such things as “price gouging” or “overpriced everything.” So, some people might conflate high prices with high inflation. But enough to explain our survey results? Doubtful. Moreover, the gap between vibes and facts goes well beyond inflation, strongly suggesting choice of words isn’t the explanation. By 47% to 41%, more Journal poll respondents think their investments or retirement savings went in the wrong direction in the past year—a period in which the stock market roared to record highs, home values held steady or rose, and interest on savings went up. The average customer retirement account at mutual fund giant Vanguard grew 19% last year..." Greg Ip Food Sport International

In our new survey from The Guardian and The Harris Poll, 55% of Americans wrongly believe the U.S. economy is shrinking this year rather than growing. Also, 49% believe the S&P 500 is down for the year (it's up). 66% of Americans say it's difficult to be happy about positive economic news when they feel financially squeezed each month. 62% of Americans think the economy is worse than the media makes it out to be. #economy #inflation #politics

Interesting survey results from a new Harris poll. Americans aren't looking at economic numbers; they're looking at the receipts from their grocery store visits, child care costs, stagnant wages and underemployment. “55% believe the economy is shrinking, and 56% think the US is experiencing a recession, though the broadest measure of the economy, gross domestic product (GDP), has been growing.” “49% believe the S&P 500 stock market index is down for the year, though the index went up about 24% in 2023 and is up more than 12% this year.” “49% believe that unemployment is at a 50-year high, though the unemployment rate has been under 4%, a near 50-year low.” “The vast majority of respondents, 72%, indicated they think inflation is increasing. In reality, the rate of inflation has fallen sharply from its post-Covid peak of 9.1% and has been fluctuating between 3% and 4% a year.” “Many Americans put the blame on Biden for the state of the economy, with 58% of those polled saying the economy is worsening due to mismanagement from the presidential administration.” #personalfinance #finance https://lnkd.in/gGsYzPii

U.S. Census Bureau has been tracking the impact of #supplychain disruptions and #inflation on small businesses through two near real-time surveys: the most recent, the Business Trends and Outlook Survey (BTOS), and its predecessor, the Small Business Pulse Survey (SBPS). A stunning 78% of U.S. small businesses reported price increases in April 2022 but it has dropped since to 40% and 58.4% now report no change. #AmericaCounts #smallbusiness #BTOS

The economy is bad, inflation has made everything more expensive, and yet people are still spending. This is a really interesting article from the Wall Street Journal. "Consumers should be spending less by now. Interest rates are up. Inflation remains high. Pandemic savings have shrunk. And the labor market is cooling. Yet household spending, the primary driver of the nation’s economic growth, remains robust. Americans spent 5.8% more in August than a year earlier, well outstripping less than 4% inflation. A tough housing market has more consumers writing off something they’d historically save for, while the pandemic showed the instability of any long-term plans related to health, work or day-to-day life. So, they are spending on once-in-a-lifetime experiences because they worry they may not be able to do them later." Have the last couple of years shifted the way you spend money? #fcf #flatbush #flatbushfund #community

It appears that the perception of the strength of our #economy does not match reality. Most #economicindicators show astounding #economicgrowth, but perception lags. Why? Could the growth be concentrated in the hands of just the wealthy? They do appear to be doing well, but the data suggests that #wages are up across the economic spectrum. Could it be #inflation? It appears that inflation is returning to the normal range ( https://lnkd.in/gCNYJwus. ). In addition, Americans are certainly not spending like they believe the economy is flailing ( https://lnkd.in/geBJBTwz ). Again, when pollsters drill down and ask people how they themselves are doing, most Americans believe that they are doing OK. To be sure, there are many parts of rural America as well as communities of color where economic success is lagging, but generally speaking, the economy appears to be picking up momentum. How do we change perceptions? https://lnkd.in/gHaKbXc8