Newsvibecession
Jul 01, 2024 12:41 PM EDT
The phrase "vibecession," coined by Kyla Scanlon, sums up the state of the economy today: a mismatch between economic data and the public's gloomy outlook. There is a sense among many that the economy is in a slump, driven more by mood than by real economic realities, even though the National Bureau of Economic Research (NBER) has not declared a post-pandemic recession.
Scanlon first used the term "vibecession" in June 2022 to characterize this occurrence. Consumer confidence was falling, inflation was skyrocketing at 9.1%, and the Federal Open Market Committee (FOMC) had recently raised interest rates by 75 basis points. Notwithstanding the fact that a recession was never formally proclaimed, this combination created a generalized feeling of economic doom.
A recession is often defined as two quarters of GDP decrease, which started in 2022. But shortly after, the GDP started to rise again. Strong labor market data were cited by the Federal Reserve as proof that a recession was unlikely. As the University of Michigan's Consumer Sentiment Index demonstrates, consumer confidence has not increased above pre-pandemic levels despite these encouraging signs.
Several factors contribute to this lingering vibecession.
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The impact of this negative sentiment on the economy is significant. When consumers believe the economy is in trouble, they tend to reduce spending, which can hinder economic growth. However, despite the pervasive negative sentiment, consumer spending has remained relatively steady. Job security and disposable income continue to support economic activity, preventing the negative sentiment from translating into a full-blown economic downturn.
There is hope that the vibecession will fade as economic indicators continue to improve. Maintaining consumer confidence and addressing public perception will be crucial for sustained economic growth. Balanced media reporting and realistic public expectations are essential to support economic stability and prevent sentiment-driven economic slowdowns.
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