Economic Sentiment Falls to Lowest Level Since the Great Recession
February 11, 2022
Americans’ feelings about the economy are as low as they have been since the worst point of the Great Recession. The University of Michigan’s Economic Sentiment Index has fallen to 61.7, the lowest level since October 2011’s reading of 60.8.
The growing pessimism is due in large part to inflation, with the survey’s director noting that “The impact of higher inflation on personal finances was spontaneously cited by one-third of all consumers, with nearly half of all consumers expecting declines in their inflation-adjusted incomes during the year ahead.”
As Bloomberg notes, it’s striking that economic sentiment is nearly at the same level as during the worst stretch of the Great Recession. In October 2011, real wages were at their post-Great Financial Crisis low and unemployment was nearly 9%, more than double what it is today.
The University of Michigan notes that the recent declines seen in the Sentiment Index have historically signaled the onset of a sustained downturn in consumer spending. However, the unprecedented nature of the post-pandemic economy makes it impossible to determine how deep the slump will be. Households are sitting on huge amounts of savings following government stimulus and lessened consumption during the pandemic, and consumers may feel less need for precautionary saving and be more willing to spend, even as their outlook worsens.