The University of Michigan Consumer Sentiment Index has dropped to its lowest level in seven months, with a reading of 65.6 for June compared to 69.1 in May, below the expected 72-level consensus. This decline in both current conditions and expectations categories is a clear indication of the weakness in the U.S. economy and the impact of persistent inflation.
Inflation reached 3.3 percent in May, with significant increases in services, shelter, and electricity compared to a year ago. The Consumer Price Index (CPI) reading for June showed no increase from May, but this does not indicate zero inflation for the month. The Inflation Reduction Act has contributed to inflation by interfering with the Federal Reserve’s efforts to control the money supply, leading to a higher federal deficit and prolonged inflation.
Despite claims by Neo-Keynesians that the economy is on a path of disinflation, the reality is that consumers are experiencing flat real wage growth, loss of purchasing power, and increasing debt. The government’s excessive intervention through deficit spending has led to persistent inflation, weakened productivity growth, and rising taxes.
The U.S. consumer is accumulating debt to sustain consumption, with credit card debt reaching record levels, indicating a fragile economy. The current fiscal expansion is failing to strengthen the private sector, resulting in increased debt and interest expenses. Large corporations may weather these challenges, but small businesses and average consumers are struggling.
The discontent seen in developed countries stems from government focus on inflating macroeconomic figures at the expense of average consumers and small businesses. Public debt is not a tool for growth but a burden that will hinder future growth and increase taxes.
Negative economic news circulating on social media is cited as a possible factor contributing to poor consumer sentiment, along with high prices eroding incomes. However, blaming negative economic news overlooks the impact of inflation and higher taxes on consumer sentiment. The discrepancy between GDP and GDI, unemployment rate and labor force participation, and real wages compared to nominal readings highlight the reasons behind consumer unhappiness.
In conclusion, the current economic challenges point to the need for a reevaluation of fiscal policies to support sustainable growth and address the concerns of consumers and small businesses. Please provide an alternative version.
Source link
