by Carlos Torres and Michelle Jamrisko, Bloomberg News, published June 26, 2015
Americans are placing bigger bets that incomes will outpace inflation
For the past six years, Americans have been hearing that this economic expansion is lackluster. They’re now OK with it, and moving on.
That’s how Richard Curtin, director of the University of Michigan Survey of Consumers, characterized the disconnect between weaker economic growth and improving household confidence. A report Friday showed the group’s consumer sentiment gauge rose to 96.1 in June, the second-highest reading in eight years.
The chart below shows that each successive expansion since the 1990s has been weaker. The world’s largest economy contracted in the first three months of 2015, forcing economists to rein in forecasts for the year as a whole.
The gain in confidence “is due to both an improving economy from the consumer perspective, but it also may reflect the acceptance of the diminished economic prospects in the years ahead,” Curtin said. “They rate what we would have considered in a bygone era to be rather modest or mediocre growth more positively.”
Families are even shrugging their shoulders at moderate income expectations, primarily because they believe low inflation is here to stay. The next chart shows what households say are the odds that their incomes will beat inflation over the next five years.
“The divergence between declining economic forecasts by policy makers and economists and the surge in optimism among consumers has rarely been greater during the past half-century,” Curtin said.