Consumers are feeling better about the economy. Is ‘Vibe Session’ over?

Some experts see this as a sign that consumers’ negative perceptions of the economy have finally turned a corner. And the same goes for the term “vibecession,” a term coined last year to describe a self-fulfilling prophecy about what Americans’ declining economic expectations will be like. The recession that led to a real recession is finally coming to an end.

Others see a rush of year-end optimism with more skepticism, noting that the economy needs to develop further before this shift in consumer perception becomes permanent.

“The good news yesterday was that the mood improved rather than worsened,” said Christopher Clark, assistant professor of economics at Washington State University. “But is the vibe session over? I would say no.”

‘Light at the end of the tunnel’

Consumers are pretty grumpy about the economy in 2023.

That’s despite a tough job market, slowing price growth and wage growth outpacing inflation for months. Americans continued to spend, but consumer sentiment surveys were consistently pessimistic. During the first three months of this fall, the forward-looking Conference Board index fell to levels that often signal a recession.

“This has been one of those economic indicators that has been flashing warning signs for some time,” said Callie Cox, investment analyst at investment platform eToro. “It didn’t crash, but it showed that people were unhappy with something,” she said.

Wednesday’s report showed a reversal of that trend. The survey results also showed that more Americans feel better about the present moment and have higher hopes for the future. The indicator showing how consumers feel about the current economy increased from 136.5 the previous month to 148.5.

“It tells us that Americans feel better about the economy they live in,” Cox said. He thinks falling mortgage rates and an improving housing market could help boost morale.

Wednesday’s numbers, along with a still-strong job market and growing confidence that the Federal Reserve is done raising interest rates, bode well for this ambiguity to continue into 2024, Cox said.

“We got this far in the rate hike cycle without much change. “It’s a reason to celebrate,” he said. “Americans are finally seeing light at the end of the tunnel.”

‘We’re having a really hard time’

Others believe consumers may be slower to return.

Clark, a Washington State economics professor, also regularly posts videos analyzing economic data on TikTok, an app that has now become a hotbed of economic discontent.

Read more: Is the United States in a ‘quiet recession’? TikTok creators say yes, but economists disagree.

Comments on his video demonstrate that many people still harbor deep frustration about the economy, he said.

“Every time I say anything positive about the economy, people comment in the comments saying, ‘You’re a denialist,’ ‘You have no idea what’s going on on the ground,’ or ‘We’re really struggling.’ ‘Here,’ he said. “The amount is huge.”

He said the concerns weighing most heavily on users’ minds – rising rents, gas prices and expensive groceries – seem very familiar.

Food seems to be a particular headache. A recent poll commissioned by the Atlantic found that high food prices are the most important factor shaping the economic perceptions of most Americans, with 60% of respondents citing food as one of the top three factors evaluating their current economy . .

“Things are looking really good with inflation,” Clarke said. “(But) the general public will process information much more slowly than experts will chew up the latest numbers.”

‘We’re not out of the woods yet’

If consumers are still holding on to their old economic frustrations, the markets will tell a different story. The rally was sparked by growing investor confidence that the Federal Reserve had completed raising interest rates, and some were concerned about this.

On Tuesday, the Dow Jones Industrial Average DJIA recorded its fifth straight record close of a total nine-day streak of gains, while the S&P 500 SPX closed at its highest level since January 4, 2022.

“That kind of optimism is spreading quickly throughout the economy,” said Cornell Fullenkamp, ​​an economist and professor at Duke University. “There is some concern that it was a little premature.”

He believes the key to maintaining consumer confidence over the long term lies in higher wages, a more permanent solution that could cushion the impact of painfully high cumulative price increases.

“People are getting used to the idea that the price of a dozen eggs isn’t going to drop anytime soon. But they have enough take home pay to be able to afford it,” he said. “To me, it’s one of those things that really lifts people’s spirits.”

Can we maintain this good vibe in 2024? Clarke said it was a little too early to tell.

“Things are moving in the right direction, but… “We are not out of the woods yet,” he said.