Is the “Vibe-cession” for US Consumers on Its Way Out?

Falling inflation hasn’t yet translated into good feelings among US consumers. Based on the latest data, that might be changing.

Over the past few months, analysts have coined a new term to describe this confounding US economic environment: a “vibe-cession.” It seems there’s a wide disconnect between economists’ optimistic assessments based on incoming data and a stubborn pessimism among consumers. To put it bluntly, consumers just aren’t feeling the vibes.

We think there’s a fairly simple reason for the gap. What’s more, we think it’s starting to close.

By most economic metrics, 2023 was an exceptionally good year. Growth in headline inflation, as measured by the Consumer Price Index, cooled markedly, and it did so without the recession many forecasters viewed as necessary to recalibrate inflation only a year ago. The unemployment rate stayed under 4%, wage growth outpaced inflation and the stock market ended the year at an all-time high.

Despite all the good news, most measures of consumer confidence remained subdued at best, which poses something of a puzzle. But we do see an explanation—and a solution.