Joe Biden says the economy is great. Paul Krugman says the inflation war is over and we won. But Americans aren’t buying the narrative. They’re growing increasingly worried about the economy and inflation.
The University of Michigan Index of Consumer Sentiment tanked in October with inflation worries at the highest level since last May.
Overall consumer sentiment fell 7.5% from last month to a reading of 63.0. the expectation was for only a slight decrease to 67.2.
Assessments of personal finances declined by about 15%. According to the University of Michigan, this was primarily driven by a substantial increase in concerns over inflation.
One-year inflation expectations jumped from 3.2% to 3.8% over the last month. This ranked as the highest reading since May. It is also well above the 2.3% to 3.0% range recorded pre-pandemic. Americans are also worried that price inflation will linger. The five-year inflation outlook ticked up to 3.0% in October from 2.8% last month.
Meanwhile, 49% of consumers reported that high prices are eroding their living standards. That was up from 39% in September and matched the all-time high we saw in July 2022.
According to UM, “Nearly all demographic groups posted setbacks in sentiment, reflecting the continued weight of high prices.”
One-year expected business conditions also plunged, dropping about 19%. Long-term business expectations were basically unchanged.
Perception vs. Narrative
There is a dichotomy between Americans’ perception of the economy and the official narrative peddled by the Biden administration, Fed officials, academics, and the mainstream financial media. Americans have a much more dim view of their economic situation than the narrative would imply they should.
That means either people don’t understand their own situations or the official narrative is wrong.
A CNN report last month drove this point home, touting “Biden’s strong economy” and asking why it “feels so bad” to most Americans.
By almost any objective measure, Americans are doing much better economically than they were nearly three years ago, when President Joe Biden took office. Still, a majority — 58% — say Biden’s policies have made economic conditions worse.”
In other words, why can’t these dumb rubes understand how good they have it?
University of Michigan economist Justin Wolfers insists there is “literally no question” that the economy has improved under Biden.
And then we have Paul Krugman, who ran a victory lap on X claiming inflation is dead after the September CPI report came out.
The problem is politicians and their courtesans in academia and the media don’t live in the real world. They live in a world of data and spin that they can manipulate to formulate a narrative. But narratives don’t matter to a couple in the checkout lane at the grocery store trying to figure out how they’re going to pay for food this week.
Peter Schiff made this point in a recent interview with Dan Ball. Ball played a clip of a man walking through Cosco showing how much prices have gone up in the last year. It’s clear that a lot of prices have risen far more than the CPI data reveals. Peter said those photos don’t lie.
It’s just the CPI that lies.”
He went on to say real price increases get “lost in the sauce of the CPI.”
Schiff said this explains the dichotomy between narratives and consumer sentiment and it’s one of the reasons President Biden is so unpopular.
The reason his popularity is so low is because the economy stinks. It’s because inflation is so much higher than the CPI reflects. That’s why people are struggling. That’s why so many people have second and third jobs. They can’t make ends meet with their first job because the cost of living has gone up so much.”
When it comes to price inflation, economists and Fed officials insist it’s cooling. But they remove food and energy prices from the discussion and fixate on “core inflation” to make their case. Krugman went even further when he ran his victory lap and exed out shelter. That might sound good in a news report or an op-ed, but it falls a little flat for the average person who can’t just X food, energy and housing costs out of their budgets.
Sure you can take the data and spin this into the greatest economy in history. But real life doesn’t care about politics and spin. People understand their own economic reality. And they’re not happy about it.
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