No Spin, No BS, No Hype–Here’s How the Economy Is Really Doing.

Why There’s Such a Stark Disconnect Between How People Feel About the Economy, and What Leaders Say About It

Table A. Percent changes in CPI for All Urban Consumers (CPI-U): U.S. city average, June 2023. Bureau of Labour Statistics. 

By far and away, when we — economists, politicians, marketers, pollsters — ask people, their number one issue is the economy. And yet parsing how it’s really doing these days can be tricky. Good, bad, up, down? It seems you can read a dozen takes — and they’ll all arrive at different conclusions.

And if you do that, you might begin to feel a strange disconnect. People don’t think the economy’s doing so well. But economists, politicians, pundits, and so forth all insist that it is. They insist in more and more strident terms, in fact — it can feel as if they’re remonstrating and scolding people for being too pessimistic about the economy. You can read endless articles about this form of bewilderment — hey, why don’t people get that the economy’s…roaring?

Meanwhile, if you look at data like this, which tracks how people are feeling about the economy, they feel as bad or worse than during the last few proper, hard downturns.

Strange situation, no? Are people wrong — or are experts? Both? Neither? What’s going on here? Let me put that another way.

How’s the economy really doing? We’re going to explore it together, and by the end of this essay, you’ll have a firm handle on just that question. You’ll understand, too, the disconnect — not just what it is, but why it is.

Look at the chart above. I’ve circled the important bits for you. That’s inflation — this is in America, but figures globally roughly follow similar trends, only they’re higher. What do the circled bits say? Let’s go through it step by step, so that you really understand what the data shows.

We could begin at the top, with food. The most basic…basic…of all. What does the chart say? Food inflation is still at 6%. “Food at home” — meaning stuff that you buy at the grocery store, bread, milk, cheese, meat, eggs — is hitting about a 5% inflation rate. “Food away from home” — that’s eating out, whether you sit down at a nice restaurant, or order in, or even pick up a takeaway — is inflating at about 8%.

Let me pause there for a moment. These are inflation rates. That means: how much prices are going up. Still going up. It’s true that they’ve come down, even in the category we’ve already discussed. Food inflation’s fallen from about 8% to 6% in recent months. But that doesn’t mean that the price of food is going down. It means that it’s still going up, only a little less fast and hard.

That fall of about 2% is what’s known as “disinflation.” That’s a fall in the inflation rate — and it doesn’t mean that prices are going down. That’s a crucial point, because, remember, we’re trying to understand a) how the economy’s really doing and b) the disconnect between people’s experiences and sentiments, and the larger idea, coming from institutions, that the economy’s doing well. Prices aren’t going down — they’re just going up a little bit less. How much is that larger trend true?