Grocery inflation has been cooling sharply, but Tamira Flamer, 27, says she hasn’t noticed. What she knows is that paper plates and meat remain more expensive than they were a few years ago.
“I feel like it’s been rough,” said Ms. Flamer, a mother of two who drives for Amazon, while standing outside a Dollar General near her home in Norristown, Pa., on Sunday.
Ms. Flamer, an undecided voter who says she is most focused on economic issues, underscores a challenge for Vice President Kamala Harris as the presidential election barrels toward its final days.
Voters say that they are very focused on the economy as they head to the polls, yet surveys suggest that they feel relatively glum about its recent track record. That could hurt Ms. Harris while helping her opponent, former President Donald J. Trump.
The lingering pessimism is also something of a puzzle. The job market has been chugging along, although more slowly, overall growth has been healthy and even inflation is more or less back to normal. Fresh data set for release on Thursday are expected to show that prices increased by a mild 2.1 percent over the past year.
Confidence has crept back up as inflation has cooled, but it remains much lower than it was the last time the economy looked as solid as it does today. That is true for both the University of Michigan’s confidence index and a separate measure produced by the Conference Board, an organization that conducts business and economic research.
Here’s a glimpse at what might be happening.
Consumers may focus more on price levels than price changes.
There’s a simple reason that many people still feel iffy about the economy: sticker shock.
Although prices are now climbing much more slowly, costs for necessities like groceries and housing are much higher today than they were a few years ago. Many households still feel that burn when they go to pay the bills.
In fact, surveys show that consumers correctly understand that inflation is slowing. The University of Michigan’s inflation expectations measure, and another produced by the Federal Reserve Bank of New York, both show that consumer expectations for future inflation have been slowly moving down.
But they are also annoyed that prices are higher than they were before the pandemic; that levels are up, even if they are no longer rising as quickly.
“It’s not that they’ve lost touch with reality,” said Joanne Hsu, director of consumer surveys at the University of Michigan, explaining that consumers often raised the issue of high price levels during their interviews. “High prices continue to weigh down their personal finances, and that remains very frustrating.”
Wages have climbed faster than prices for many consumers, but that is not true across the board. And people tend to see raises as something that they have earned, whereas they see price increases as something that is being done to them — perhaps even unfairly.
Housing affordability is also bad.
The grocery store is not the only place where prices are noticeably higher. Housing costs have climbed a lot in recent years. And for people who are hoping to buy a first home, affording one has become much more difficult since 2020.
That’s partly because of Federal Reserve policy. Central bankers lifted interest rates sharply in 2022 and 2023 to restrain demand and wrestle inflation back under control. Those elevated official borrowing costs feed into higher mortgage rates — making it much pricier to buy a home on borrowed money.
And while the Fed cut interest rates in September, and is widely expected to lower them at least one more time this year, analysts do not expect the central bank to cut rates to the rock-bottom levels that prevailed in 2020 and throughout the early 2010s.
The reasons for that are positive: America’s economy is doing well. Even if consumers say they feel bad in surveys, they have shown a willingness to keep spending, and U.S. growth is much stronger than what countries like Germany or China are experiencing.
Given that, the Fed may not need to set rates at historically low levels to keep activity chugging along, the way it did before.
“We’re not going back to 3 percent mortgage rates — even 4 percent is a pipe dream,” Greg McBride, chief financial analyst at Bankrate, said in an email. “The path of mortgage rates will depend on economic growth and inflation, but the new normal over the next couple years will be mortgage rates in the fives and sixes.”
Neither interest rates nor home prices are part of inflation — rents are — but housing is both the typical household’s biggest expense and a crucial avenue for building wealth and eventually getting ahead in America. That makes it important for the nation’s economic psyche.
There’s a clear partisan divide.
Some of the sour attitude boils down to simple partisanship.
Republicans tend to be much more optimistic when a Republican is in office. Democrats also tend to be slightly happier when a Democrat is in office. But they have not displayed the same kind of night-and-day difference.
Since President Biden has been in office, Democrat’s confidence level in the University of Michigan index has been about 15 percent higher on average than it was when Mr. Trump was incumbent. Republican confidence, by contrast, has taken a staggering 56 percent hit.
And the bulk of that decline happened right after Mr. Trump lost the 2020 election, though there was a smaller, second leg down after inflation began to pick up.
But partisan preferences do not simply shape economic confidence. Sentiment could help to feed into politics. And that’s one reason today’s wobbly confidence matters.
The end result could shape the election.
Surveys suggest that many Americans are prioritizing the economy as they think about their vote. A national New York Times/Siena College poll of the nation’s likely electorate taken in late October found that 27 percent of respondents had ranked the economy as the most important issue in deciding their vote this election — making it the No. 1 issue in America.
Another 4 percent of voters specifically prioritized inflation and the cost of living, more than those who prioritized foreign policy, taxes or climate change.
Both candidates are focused on prices as they head into the race’s final stretch. Ms. Harris’s campaign subtitled its economic blueprint “A Plan to Lower Costs and Create an Opportunity Economy.” Mr. Trump has been promising to cut costs by lowering gas prices to less than $2 per gallon. (Industry experts have serious doubts about whether policy could bring gas prices down that much.)
This week’s economic reports are final glimpses at the economic data voters will get as they head to the polls, putting Thursday’s inflation figures and jobs numbers set for release on Friday in the spotlight.
This could clearly be an economy election — but a complicated one, as inflation cools, growth remains solid and Americans, nevertheless, remain unconvinced.
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