Americans Feel Better About the Economy. Should We Believe Them?

livemint.com:

A pair of optimistic headlines in recent weeks suggest consumers are beginning to shrug off higher interest rates, the inflationary surge and recession fears—and feeling confident again about the economy. The Conference Board, a business-research nonprofit, reported its measure of consumer confidence in June climbed to its highest level since January 2022. The latest reading last week from the University of Michigan’s index of consumer sentiment was the highest since September 2021.

These are the two best-known gauges that seek to capture the mood of U.S. families and turn that frame of mind into numbers that we can track over time. The idea is that to really understand what is going to happen in the U.S.

economy, it doesn’t suffice to only know if people have jobs, whether their incomes are up, or what the stock market is doing—you need to know how they feel. But a closer look at the numbers behind consumers’ moods paints a more complicated picture than the simple story that things are the best in a year and a half. “I don’t think we’re out of the woods yet," said Joanne Hsu, the director of the consumer surveys at the University of Michigan.

Both indexes involve five questions—two about current conditions and three about expectations for the future. The University of Michigan and Conference Board measurements are based on longstanding surveys—Michigan’s since the 1940s, and the Conference Board’s since 1967. The readings have garnered regular headlines for decades in the financial news that tracks the ups and downs of consumers.