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Americans Feel Better About Today’s Economy, But Clouds Loom Over Future Finances – Forbes Advisor

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Americans are feeling more upbeat and have gotten the holiday shopping season off to a strong start, but they remain anxious about inflation and what it will do to their finances over the coming months.

The latest Forbes Advisor-Ipsos Consumer Confidence Biweekly Tracker finds consumers are generally in a better mood than they’ve been at any time since the summer, and they’re feeling increasingly confident about the job market. Still, they worry about mortgage interest rates, taxes and their monthly bills.

Most Expect Prices Will Keep Rising

Only a third (33%) feel more confident about making a major purchase—like a new car or a house—than they did six months ago.

“Consumer confidence remains well behind where we began the year, as a majority of Americans expect inflation to rise,” says James Diamond of Ipsos.

The overall confidence index has ticked up to 50.7 after almost a two-month slump, hitting its highest point since late August. But it’s down more than 10% from mid-January.

Roughly 6 in 10 Americans (59%) say they believe the rate of inflation will go up, and a slightly higher share (61%) say they expect their monthly expenses will increase. Majorities also think their taxes and mortgage interest rates will rise.

Mortgage rates have been soaring as the Federal Reserve has been steadily hiking interest rates to combat inflation. They exceeded 7% for the first time in 20 years in late October and continue to hover around that mark.

Confidence in Employment Remains High

Thanks to the Fed, there have been warnings that higher borrowing costs for businesses could drive up unemployment. But consumers don’t seem spooked by those predictions, or by recent high-profile layoffs at tech companies.

Americans are feeling increasingly positive about their job prospects. A jobs index that contributes to the overall Ipsos-Forbes Advisor consumer confidence reading has jumped to a score of 65—5.5 points above its historical average.

Nearly half (48%) of survey respondents say they’re more confident than they were six months ago about job security for themselves and their friends and relatives. Only 25% report that someone close to them has lost a job within the past six months.

The sunnier outlook about jobs may be tied to stronger-than-expected growth in the economy during the third quarter of this year, as measured by the gross domestic product, says Krieg Tidemann, assistant professor of economics at Niagara University in upstate New York.

“After starting out 2022 with two straight quarters of declines in GDP, there was considerable discussion about whether or not the US economy was entering a recession,” Tidemann says. “Given the linkage between recessions and rising unemployment, it is understandable that this could trigger employee concerns over their job security.”

However, the Fed suggesting that a recession may be likely in 2023 will test Americans’ jobs outlook in the coming months.

Read more: Are we in a recession yet?

Holiday Shopping Starts With a Boom — and Under a Cloud

The survey was conducted Nov. 28 and 29 as the results were coming in from what appeared to be a booming start to the holiday season.

The National Retail Federation says a record 196.7 million Americans shopped over the long Thanksgiving weekend and spent an average of $325 per person, up from $301 in 2021. Online shopping had its biggest day ever as consumers spent $11.3 billion on Cyber ​​Monday, 5.8% more than last year, according to Adobe Analytics.

But inflation played a big role in those numbers because the higher sales figures were driven by higher prices—and by inflation-battered shoppers eager to find deals.

“If more was spent this year during Black Friday and Cyber ​​Monday, this likely indicates that inflation is causing more households to pay close attention to prices than normal this holiday season,” says Tidemann.

It’s a trend that’s been showing up close to home for him.

“I also have received earlier requests from family and friends for gift ideas, indicating that they are similarly following the trend of inflation-driven increased price sensitivity within American holiday shoppers,” Tidemann says.

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