Q: If we sum partisan asymmetry effect on current econ/sentiment mismatch (30%), plus this (decaying) inflation-rate effect, what % of the mismatch is attributable to those two effects? Thanks.
"..As many have noted, the rise of social media as a prominent information source – with misleading viral posts on high prices – may have scrambled the link between economic fundamentals and consumer sentiment to some extent..."
I'd argue that it's not just social media that's scrambled this link, it's once half of our mainstream media.
Fox News has immense reach, and it's aggregate message on the economy - delivered in snippets over a news cycle - is that since Biden took office we've been teetering on the bring of recession, possibly depression, and we've had and continue to have the highest inflation this nation has ever seen. Half of America is getting that implication daily and one has to wonder what consumer sentiment would be if they were getting a more accurate picture.
Just a reminder that Moody’s Analytics predicted a Hillary win in 2016 in part because of low gasoline prices…except after the Fracking Revolution high energy prices aren’t necessarily a negative for America. So high energy prices of 2022 led to investment in America and now we are producing record amounts of oil and natural gas…and Texas A&M could pay a mediocre coach $75 million to walk away and SMU could buy its way into the ACC. ;)
Any possibility that change in mortgage interest rate and other consumer lending rate has a more direct effect on consumer sentiment? E.g., inflation rate falls, but there is a delay before mortgage rates fall, and that is why consumer sentiment takes time to turn around. What is the correlation between consumer sentiment index and some measure of consumer borrowing rates? Similar story in Canada, where I live. CPI inflation has fallen from 8.1% peak in June 2022 to 3.1%, but consumer confidence still low. As in USA, interest rates have not come down much yet. But, economy weaker in Canada than in USA, so comparison not exact.
I often wonder how these types find their way home at night. Stanford+White House , could you possible be more out of touch with the real world. I guess you don't fill your car with gas or buy groceries, pay rent or a hope to get a mortgage. You could freeze everything for the next 12 months, inflation would technically be a zero and people will still be pissed. They will be pissed because 3 years ago gas was $2 , groceries were $50 and rent was $1,800. Under Bidenomics that went to $6 / $100 / and $2,800. Because they are about the same does not mean they are good. #allthingsbeingequal
This is exactly the analysis I’ve been looking for to explain how consumers consider and hold onto the cumulative price increases, very smart and timely stuff.
Hey this and the prior post are great. Thank you for running the numbers so sensibly. I pushed both of them on BlueSky, hope it helps. https://bsky.app/profile/steveroth.bsky.social/post/3kfqe7cxk2h2v
Q: If we sum partisan asymmetry effect on current econ/sentiment mismatch (30%), plus this (decaying) inflation-rate effect, what % of the mismatch is attributable to those two effects? Thanks.
You write:
"..As many have noted, the rise of social media as a prominent information source – with misleading viral posts on high prices – may have scrambled the link between economic fundamentals and consumer sentiment to some extent..."
I'd argue that it's not just social media that's scrambled this link, it's once half of our mainstream media.
Fox News has immense reach, and it's aggregate message on the economy - delivered in snippets over a news cycle - is that since Biden took office we've been teetering on the bring of recession, possibly depression, and we've had and continue to have the highest inflation this nation has ever seen. Half of America is getting that implication daily and one has to wonder what consumer sentiment would be if they were getting a more accurate picture.
Just a reminder that Moody’s Analytics predicted a Hillary win in 2016 in part because of low gasoline prices…except after the Fracking Revolution high energy prices aren’t necessarily a negative for America. So high energy prices of 2022 led to investment in America and now we are producing record amounts of oil and natural gas…and Texas A&M could pay a mediocre coach $75 million to walk away and SMU could buy its way into the ACC. ;)
Good work.
Any possibility that change in mortgage interest rate and other consumer lending rate has a more direct effect on consumer sentiment? E.g., inflation rate falls, but there is a delay before mortgage rates fall, and that is why consumer sentiment takes time to turn around. What is the correlation between consumer sentiment index and some measure of consumer borrowing rates? Similar story in Canada, where I live. CPI inflation has fallen from 8.1% peak in June 2022 to 3.1%, but consumer confidence still low. As in USA, interest rates have not come down much yet. But, economy weaker in Canada than in USA, so comparison not exact.
I often wonder how these types find their way home at night. Stanford+White House , could you possible be more out of touch with the real world. I guess you don't fill your car with gas or buy groceries, pay rent or a hope to get a mortgage. You could freeze everything for the next 12 months, inflation would technically be a zero and people will still be pissed. They will be pissed because 3 years ago gas was $2 , groceries were $50 and rent was $1,800. Under Bidenomics that went to $6 / $100 / and $2,800. Because they are about the same does not mean they are good. #allthingsbeingequal
This is exactly the analysis I’ve been looking for to explain how consumers consider and hold onto the cumulative price increases, very smart and timely stuff.