The Vibes Are Off: Does Consumer Sentiment Matter More Than Facts?

NPR’s Planet Money recently released an episode detailing the current situation and the division between sentiment and statistics.

The episode outlined that:

• Inflation is at the highest level in decades.

• A consumer sentiment report published in June shows the lowest confidence in a decade.

• Unemployment is close to record lows.

• Business spending has increased.

• Retail, travel and dining spending has increased.

How does all of this come together?

Regardless of the facts, consumer sentiment and consequential behaviors will influence the economy itself and may even impact how the Fed responds as it works to combat inflation.

As rumors of an economic downturn swirl, many prospective business people are proceeding with a bit more caution. While it’s important to recognize the very real impacts consumer sentiment and behavior can have on the larger economy, it’s just as crucial to make business-related decisions by weighing multiple statistical factors rather than operating on vibes alone.