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Why it matters: Usually, consumer sentiment and the fate of the economy are closely linked – they rise and fall together – because consumers spend more when they feel the economy is strong and less when they feel it’s weak.

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• That isn’t the case now. It could be that consumers are just ahead of the curve, and a downturn will start soon, or their feelings aren’t a good barometer of the economy.

Be smart: Consumer sentiment remains well below where it was at the height of the COVID shutdown despite the economy being in much better shape. It is only slightly above the all-time low hit in June of last year.

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• Further complicating the picture is that despite their sour feelings about the economy, consumers are still spending at a healthy clip, even after accounting for inflation.

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So what gives? Consumers assume a recession is coming soon and it will be a long and bad one.

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• Frequent news about the need to raise the debt limit, and the chances Congress and the President might not agree to do so in time, dampened their mood this month also.

ICYMI:

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• Read my latest post: “Corporate Greed Is Not the Cause of Inflation; Here’s Why.”