scorecardAmericans suddenly feel much better about the economic rebound
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Americans suddenly feel much better about the economic rebound

Ben Winck   

Americans suddenly feel much better about the economic rebound
PolicyPolicy2 min read
  • The University of Michigan's sentiment index rebounded in April to 65.7 from 59.4.
  • That beat the median estimate of 59.0 and marked the first uptick since December 2021.

After growing increasingly pessimistic about the economy through 2022, Americans are suddenly finding some bright spots.

The University of Michigan's Consumer Sentiment Index unexpectedly rebounded to 65.7 in early April from 59.4, according to data out Thursday morning. That trounced the median forecast of 59.0 from economists surveyed by Bloomberg. It also marked the first uptick since December 2021 and the largest one-month improvement since 2013.

The jump was almost entirely fueled by rosier outlooks toward the economy's future, Richard Curtin, chief economist at the University of Michigan's Surveys of Consumers, said. The expectations index soared to 64.1 from 54.3, buoyed by a nearly 30% jump in the year-ahead outlook for the US economy. Respondents also recorded a 17.2% gain in their personal finance expectations despite soaring inflation.

Higher hopes for wage gains also lifted the headline index. Workers under age 45 see wages rising 5.3% in the coming year, according to the survey. That's the largest anticipated gain since April 1990, Curtin said.

Attitudes toward the present-day economy also turned more encouraging, but at a much slower clip. The index of current economic conditions rose to 68.1 from 67.2, reflecting a slightly more optimistic view of the recovery as it stands.

To be sure, the improvement only snaps a months-long downward streak and overall sentiment remains lower than almost every other month in the past decade.

Inflation remains the biggest drag on Americans' economic moods. Data out Tuesday showed prices soaring 8.5% in the year through March, reflecting the fastest inflation since 1981. While gas prices have fallen from their March peak, the Russia-Ukraine conflict continues to hold costs at extraordinary highs.

The preliminary April survey offers "only tentative evidence" of improved sentiments, and the index is still far from a full recovery, Curtin said.

"There are still significant sources of economic uncertainty that could easily reverse the April gains, including the impact on the domestic economy from Putin's war, and the potential impact of new COVID variants," he added.

Still, the print offers a sign that Americans are focusing on the good of the recovery just as much as the bad. Despite heightened inflation and lingering uncertainties, other pockets of the economy are thriving. The labor market has recouped 93% of the jobs it lost at the start of the coronavirus recession, and its rebound is broadly running three times faster than the recovery from the 2008 financial crisis.

Consumer spending, meanwhile, has staged a V-shaped recovery and then some. Retail sales rose another 0.5% in March to a record $665.7 billion, according to a Census Bureau report published Thursday morning. While the gain was smaller than that seen in February, it showed spending still sitting above its pre-pandemic trend amid strong inflation and continued supply-chain pressures.

How Americans feel about the economy could simply come down to which areas they're looking at. As inflation crept to four-decade highs through the fall, fears of a new recession fueled widespread pessimism. Yet new data shows the labor market continuing to thrive and spending still growing. Even some data in the latest inflation report suggests March could represent the peak of the price-growth problem.

It's too early to say whether the April sentiment data marks an inflection point or not, but it signals that, for now, Americans are looking on the brighter side of the recovery.