| Consumer Sentiment fell sharply in November. It hit an all-time low in June and had risen four straight months since then, albeit modestly.
Why it matters: The pronounced drop in sentiment is surprising because inflation moderated in October. With inflation being the main concern for consumers it would follow that their mood would improve, but that hasn’t happened.
Be smart: The economic data and behavior of consumers and businesses are not following expected patterns. Both consumers and businesses feel bad about the economy, yet consumers keep spending and businesses keep hiring, raising wages, and investing.
- We’ve been calling this unique circumstance “second-hand pessimism” and consumers’ dark turn this month continues the confusing pattern.
Looking ahead: Updated spending data, which we’ll get later this week, will tell us more about whether this phenomenon continues, or whether spending is finally slowing to match the poor mood of consumers.
- There has been no sign that’s the case yet, so the confusing split between sentiment and actions is likely to continue. That would be good news for the economy because actions speak louder than words when it comes to growth.
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