We consumers make up 2/3 of our national economy, so what we buy, how we buy it, and even how we think about how, what, and when we buy is closely scrutinized and widely publicized. Today, Consumer Sentiment raised to 63.9, a marked increase from last month’s 59.2. In context, the all-time-low was a year ago at 50 and the 20 year high registered at 101 the month before Covid hit. So at this moment we’re still not overly optimistic. But what I find interesting about that smattering of statistics is that we were buying everything we could get our hands on over that afore mentioned 28 month period but progressively felt worse and worse about our purchases. Perhaps the reason we became less enchanted with spending money over that two year period is the fact that prices rose over the exact same timeframe.
Enter the Fed’s most recent round of hikes which has sent interest rates up 5% in the last 14 months. The ideology behind that decision was to curb the price increases, and it worked. Inflation at the producer and consumer levels are down by 50% from a year ago. They still have a bit to go before Mr. Powell & Co. feel like they can once again high five each other and hang up the “mission accomplished” banner. But this week they made the decision to step back from hiking and survey the landscape their policies have created. And what they’ve constructed thus far is an economy that helps people feel better about spending money again.
Lower prices and a more contented shopper are precisely what the Fed has been trying to engineer with their handiwork. Businesses and consumers need to make money and spend money for an economy to work. And as a hopeful recipient of some thoughtful trinkets this weekend, I applaud the POV of expanding exuberance right before Father’s Day. I know that you are also a dad Mr. Powell, so well played, well played. I hope you get another really nice, conservative tie.