Americans Are Finally Feeling Better About The Economy

After months of gloom, Americans are finally starting to feel better about the economy and more resigned to inflation.

Consumer sentiment, which hit rock bottom in June, has begun inching up in recent weeks. Gas prices are down. Decades-high inflation appears to be easing. And at the same time, Americans are making small changes — buying meat in bulk, for example, or shifting more of their shopping to discount chains — suggesting that many families are learning to deal with higher prices.

“While consumer sentiment is still fairly low by historic standards, we’re starting to see pretty dramatic improvements,” said Joanne W. Hsu, an economist at the University of Michigan and director of its closely watched consumer surveys. “It’s very much being driven by a slowdown in inflation, particularly with the decline in gas prices.”

That’s particularly good news for the White House, which has been hammered by criticism that it hasn’t done enough to address inflation.

Gas prices, which peaked at more than $5 a gallon in June, are down to about $3.74 a gallon nationwide. That 25 percent drop in costs has been substantial for many Americans, particularly those in lower-income households where gas costs make up a larger share of weekly expenses.

Overall inflation, meanwhile, has eased slightly — prices remained flat in July, though they’re still up 8.5 percent from a year ago — as a result of aggressive interest rate hikes by the Federal Reserve.

Even so, the impact on both pocketbooks and psyches has been swift. Measures of business conditions, short-term financial prospects and purchasing plans all improved in August, according to key metrics from the Conference Board. Consumer confidence increased that month after falling for three straight months, and the number of Americans reporting vacation plans reached an eight-month high.

“When gas prices go down at the pump, people immediately feel better,” said Diane Swonk, chief economist at accounting giant KPMG. “Inflation is still high, but the fact that gas prices have come off record highs makes a huge difference in how much people are spending and their expectations for the future.”

In Omaha, Nils Haaland says he’s feeling much better about the economy now that filling up his Honda pickup costs $65 instead of $95. Haaland teaches theater at a community college and sometimes works as a handyman. He says soaring prices for fuel and food this summer forced him and his wife to stop dining out, postpone summer travel and buy less meat. Although prices are still relatively high, he says he feels less worried that inflation will continue to spiral out of control.

“For a long time, I was making sure I wasn’t just indiscriminately filling up my cart at the grocery store, but now a lot of that behavior has loosened up a bit,” the 58-year-old said. “When gas went back to $3.50 a gallon, all of a sudden it was like, ‘Oh, we know how to make this work. Things are going to be okay.’”

Read the full article from The Washington Post here.