Weekly Updates
Weekly Updates
- When economists have had a bad week, they can turn to the University of Michigan consumer sentiment data. The detail is hilarious. Michigan sentiment data identifies the reported sentiment of Republicans and Democrats; the two groups appear to be living on different planets. If your party is out of the White House, all is doom and despondency. If your party is in the White House, the US economy is a perfect paradise.
- Recent academic research shows people will say one thing in a survey and do something different in reality. Today’s reportedly pessimistic Republicans are still spending like anyone else. However, negative reported sentiment may make consumers more vulnerable to profit-led inflation.
- Profit-led inflation episodes occurs when consumers are told a story about why price increases are necessary. Consumers’ willingness to believe the story allows some companies to sneak in a profit margin increase.
- If some consumers are inclined to believe that everything in the economy is bad, they are likely to be more accepting of stories about the necessity of raising prices. “Of course prices are going up. What else do you expect with this government?” becomes an accepted narrative. This might contribute to the increasing regional divergence of inflation in the US.
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