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What\u2019s consumers\u2019 relationship with the economy these days? It\u2019s complicated.<\/p>\n
As last year drew to a close, inflation appeared to be heading decisively downward, consumer confidence was shooting higher, and many Americans\u2019 wages were finally outpacing price increases. In the early months of 2024, those trends have been a little harder to see, at least on the surface.<\/p>\n
The annual inflation rate has bounced around north of 3% for months, the latest retail sales data came in soft, and wholesale prices took an unexpectedly higher leap. None of that has much rattled markets, where investors remain confident that the Federal Reserve will begin lowering interest rates this year, even if later than initially hoped \u2014 a long-awaited sign that the central bank\u2019s crusade against inflation is finally coming to a victorious end.<\/p>\n
But we aren\u2019t there yet, and the Fed seems likely to reinforce that message when it meets again next week to plot its path forward. In the meantime, consumers continue to grumble about persistently high prices for everything from houses to burgers. Here\u2019s what economists say the latest batch of indicators adds up to, and where it points in the weeks to come.<\/p>\n
About two-thirds of the recent jump in wholesale inflation came from a surge in goods prices that federal economists largely traced to rising energy costs. That includes gasoline, which jumped 6.8% in the wholesale market last month.<\/p>\n
Experts see this mainly as a normal seasonal trend. Demand for gasoline usually picks up as daylight saving time kicks in and the summer driving season nears. Prices at the pump are already rising modestly, with the average gallon of regular gas nearing $3.44 as of Friday, up 4 cents from a week ago \u2014 and that\u2019s before pricier summer-blend gas has arrived at filling stations, AAA notes.<\/p>\n
But energy markets are still dealing with some uncertainty, including from geopolitical factors like recent Ukrainian attacks on Russian refineries. On Thursday, the International Energy Agency revised its outlook for the year, predicting a slight supply deficit that could nudge up energy prices in coming months. Rising oil prices threaten to bleed into the cost of transporting goods, some experts said, which retailers could pass along to consumers.<\/p>\n
\u201cThis could be a bit of a wild card,\u201d said Ted Rossman, senior industry analyst at Bankrate. \u201cIf it all of a sudden costs 5 or 10% more to move goods around, that could contribute to inflation.\u201d<\/p>\n
With current gas prices still a few cents shy of their level a year ago, other analysts are more sanguine.<\/p>\n
Pump prices are \u201cvery visible\u201d to ordinary consumers, said Kayla Bruun, senior economist at Morning Consult, and could weigh a little on spending. \u201cBut as long as we have a strong underpinning of the labor market, it\u2019s not necessarily something to be concerned about,\u201d she said.<\/p>\n
Still, new consumer sentiment figures released Friday showed shoppers\u2019 views have leveled out after marching higher over the winter. \u201cConsumers perceived few signals that the economy is currently improving or deteriorating,\u201d University of Michigan researchers wrote of their March data.<\/p>\n
In this climate, many people are getting more conservative with their spending than they were just a few years ago. Earlier in the pandemic recovery, many Americans\u2019 bank accounts were flush with savings and stimulus money, and they flocked to reopened restaurants and fueled a boom in travel.<\/p>\n
Some of that is still happening, but on a more measured level, experts said. Budget-conscious travelers have pulled back while more affluent ones continue to shell out as airlines chase premium-level dollars. Retail sales posted a 1.5% gain in February from the same month the year before, preliminary data showed Thursday, but they rose just 0.6% from January. \u201cIf you adjust for inflation, the sales were actually down a little bit,\u201d Rossman said.<\/p>\n
\u201cA lot of people are saying, either with their words or even more so their actions, that maybe it\u2019s not the best time to do a big home renovation or buy a new TV,\u201d he said.<\/p>\n