The US Misery Index — a composite measurement of unemployment and inflation rates — is on track to end 2023 at 6.8%, its lowest level since the COVID-19 pandemic. While consumers continued to spend through the holiday shopping season, how is the Misery Index becoming apparent in consumer sentiment?
Robertson Stephens Chief Economist Jeanette Garretty details the trends seen in recent consumer spending patterns and the data that may serve as a "check engine light" in 2024.
"There is very little... economic evidence that consumer sentiment directly feeds into those near-term spending patterns — it is really driven by income. Income is up," Garretty explains to Yahoo Finance. "Job prospects, even though the unemployment rate has gone up a little bit, I think the general perception is that there is still a high demand for labor."
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This post was written by Luke Carberry Mogan.
Video Transcript
RACHELLE AKUFFO: So give us a gauge of what is happening with the consumer.
They should be happy given where wages and wages are and inflation coming down, and they're still spending, but there is this strange dichotomy going on.
JEANETTE GARRETTY: It's such a funny word, right, this word happy.
I don't know what to make of it.
But yeah, if you look at consumer spending, you've got to say they feel pretty good, or they should feel pretty good.
And there's very little evidence actually-- economic evidence that consumer sentiment directly feeds into those near-term spending patterns.
It's really driven by income.
Income is up.
Job prospects, even though the unemployment rate has gone up a little, bit I think the general perception is that there is still a high demand for labor.
And so people are sort of saying why not.
And so they're spending.
I'll make a case that this month, November-- well, these two months November and December.
This holiday sales is going to be the most surprising thing in the whole last three years of surprises because I think almost everybody thought that at this point, consumer spending would be slowing down.
The growth would be slowing down.
And that this might be a difficult holiday season for retailers.
And I think they sort of planned accordingly.
It's going to be interesting to see what goes on with their inventories.
But spending is up.
In November, consumer spending did what consumer spending has done in the past-- favored goods instead of services, and it led by, guess what, video equipment and cars.
And so this is very traditional.