Despite Strong Economic Growth in the First Half, Pessimism Spreads
"Market Reaction May Lag Despite Positive Inflation Indicators"
As the soft landing of the U.S. economy becomes visible, experts analyze that the prolonged 'vibecession'?a period of persistent economic pessimism among consumers?is coming to an end.
According to CNBC on the 9th (local time), Michael Pearce, Chief Economist at Oxford Economics, stated, "With U.S. inflation easing and the Federal Reserve's (Fed) interest rate cuts imminent, Americans' outlook for the future is improving," adding, "The so-called 'vibecession,' where negative perceptions of the economy persist for a long time, is ending, and the actual status of the U.S. economy is becoming more aligned with consumer sentiment."
Brett House, Professor of Economics at Columbia Business School, also noted, "It seems that consumer confidence is catching up to where the real economy stands," diagnosing that "the two indicators appear to be meeting at a midpoint."
Until now, the U.S. has experienced the 'vibecession' phenomenon, where there is a disconnect between the actual economic situation and the perceived economic sentiment among Americans. According to a survey conducted by the electronic payment company Affirm in June on 2,000 Americans, 59% of respondents believed that the U.S. economy is currently in a recession. Despite the U.S. economic growth rate (annualized quarter-over-quarter) recording 1.4% in Q1 and 3% in Q2, high inflation and the burden of living costs led people to feel that the economy had already entered a recession.
Chief Economist Pearce said, "It is difficult to precisely identify the causes of changes in economic agents' moods and perceptions," but pointed out, "People may be slow to react to news that inflation is steadily slowing to the 2% range, or the current Fed's announcement of rate cuts has created widespread optimism in the market."
Recently, the market has evaluated that thanks to favorable U.S. inflation indicators, the Fed has established a foundation to comfortably lower interest rates. The July Personal Consumption Expenditures (PCE) price index, the Fed's preferred inflation gauge, rose 2.5% year-over-year, confirming stabilization within the target 2% range. The August Survey of Consumer Expectations (SCE) released by the New York Federal Reserve also showed median expected inflation of 3% one year ahead and 2.8% five years ahead, maintaining a stable level. Unless the August Consumer Price Index (CPI) announced on the 11th deviates significantly from expectations, a rate cut at the Federal Open Market Committee (FOMC) meeting on the 17th-18th is virtually certain.
Professor House evaluated, "The classic Goldilocks scenario (an ideal economic condition that is neither too hot nor too cold) has been realized," adding, "It is clear that the U.S. will enter a recession at some point in the future, so recession proponents may ultimately be right, but what meaning does a victory hold if it takes years to achieve?"
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
