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Consumers View of Current Economy as Bad as During Inflation Surge of 2022

  //travel-leisure.news-articles.net/content/2025/ .. my-as-bad-as-during-inflation-surge-of-2022.html
  Published in Travel and Leisure on Friday, October 24th 2025 at 15:44 GMT by Investopedia
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The Core Finding: A Return to 2022‑Level Negativity

The study cites data from the University of Michigan’s Consumer Sentiment Index, a benchmark measure of how households feel about the present and future economic environment. According to the latest releases, the index has dropped to 65.3, a figure that sits almost squarely at the level observed in late 2022, when it hovered around 63–65. In the same period, the Consumer Confidence Index published by the Conference Board reported a dip to 95.2, its lowest point since the Great Recession. These numbers echo the Gallup Consumer Confidence Index (which recently fell to 55.4), suggesting that the decline is not isolated to a single survey.

The article points out that the downturn in sentiment is not simply a reaction to the current lower rate of inflation—currently about 3.3% year‑over‑year—but rather a deeper unease about the trajectory of growth, labor market slack, and potential further tightening by the Federal Reserve. The Fed has maintained its policy rate near the 4.75–5.00% range since March 2022, and many consumers fear that the continuation of higher rates could stall the economy and push unemployment higher.

Inflation’s Legacy and the Current Environment

In 2022, the Consumer Price Index (CPI), the primary gauge of inflation, spiked to a multi‑year high of 8.0%. The article links to an in‑depth explanation of inflation that explains how the CPI tracks the price changes of a fixed basket of goods and services, and how the Fed’s monetary policy tools influence the rate of inflation. It notes that the sharp rise was driven by supply‑chain bottlenecks, surging commodity prices, and a pent‑up demand wave following the pandemic’s easing of restrictions.

While the CPI has since moderated, the memory of a year in which the inflation surge forced the Fed to lift rates from near zero to a range that had not been seen since the early 1980s, continues to weigh on public perception. The article references a companion piece on the Inflation Surge of 2022, which recounts how the sudden rise in prices eroded purchasing power, sparked a wave of consumer savings, and caused widespread concern that the economy might contract.

The Federal Reserve’s Role in Shaping Sentiment

The article highlights how the Fed’s dual mandate—maximizing employment while maintaining price stability—has led to a policy environment that many consumers interpret as contradictory. On the one hand, the Fed’s rate hikes are intended to temper inflation; on the other hand, they can suppress economic growth by making borrowing more expensive. A linked explanation of the Federal Reserve outlines how its policy decisions affect everything from mortgage rates to the cost of credit for businesses, and why the bank’s moves are closely monitored by households.

In the past year, the Fed has also signaled that it might be “prepared to keep rates high for longer,” a stance that reinforces fears of a protracted period of tight monetary policy. The article underscores that such signals have translated into a decline in consumer confidence, as people anticipate a potential slowdown in earnings growth and job creation.

Consumer Expectations and Market Signals

According to the Consumer Sentiment Index explanation, this metric is built on a two‑question survey that asks respondents to compare today’s economy to the past year and to assess their outlook for the next 12 months. The decline to 65.3 suggests that a majority of consumers expect the economy to deteriorate. Meanwhile, the CPI link provides context for how inflationary pressures are still felt, particularly in the housing, food, and energy sectors, which dominate the consumption basket.

The article also draws attention to the Consumer Confidence Index, which, although slightly higher than the University of Michigan figure, still reflects a negative outlook: an index reading below 100 indicates that consumers believe the economy is worsening, whereas a reading above 100 signals optimism. The recent dip below 100 is the sharpest fall in consumer confidence in nearly two decades.

What This Means for Investors and Policymakers

For investors, the convergence of high inflation, tight monetary policy, and declining consumer confidence signals potential headwinds for sectors heavily dependent on discretionary spending, such as retail and travel. Conversely, industries tied to core inflation—like utilities and healthcare—may fare better. The article warns that the sentiment data, while not a perfect barometer of future economic performance, does offer valuable insight into the psychological climate that can drive market moves.

Policymakers face a challenging balancing act. The article concludes that while the Federal Reserve’s aggressive stance has succeeded in bringing inflation down from its peak, it has also left a residual cloud of uncertainty over the economy’s trajectory. The decline in consumer sentiment underscores the importance of clear communication about policy intentions, the possibility of further rate hikes, and the anticipated timeline for a return to a more stable inflation environment.

In sum, the latest consumer confidence data show that the public’s view of the economy has fallen to a level comparable to the high‑inflation year of 2022. Even though price pressures have eased, the lingering effects of rapid policy tightening, supply‑chain adjustments, and the memory of a year of sharp price gains keep households cautious. For investors, this signals a need for vigilance in sectors most vulnerable to shifts in consumer spending, while for policymakers it highlights the necessity of transparency and precision in the ongoing management of the nation’s monetary policy.