Americans are in the midst of what Business Insider calls a "vibecession," the prevailing sentiments behind whether or not a recession will occur – despite how strong the economy is now.
Economists and laymen alike are currently baffled by the state of the American economy. Job growth forecasts have doubled in July, inflation has recently slowed, and unemployment is at a pre-pandemic low. Prices for used cars, transportation, and airline fares have also dropped in the past couple of months, according to the Consumer Price Index (CPI).
However, the gross domestic product (GDP) has been falling for the past two quarters. Real wage rates are in a freefall, despite reaching high levels earlier in the year for lower-income earners. Business Insider reports that while individuals have seen the general economy at large in a negative light over the past year, they view their household finances as more stable than ever. This leads to a sort of "vibecession," where consumers, workers, and economists are pessimistic about the future while the data indicates that the economy is still strong.
However, the "vibecession" may soon be behind us if the data is persuasive enough to convince consumers that the economy isn't in shambles. The University of Michigan's Consumer Sentiment Index (CSI) has gone up four points in the past month, greatly surpassing Bloomberg economists’ predictions. Additionally, data from the Federal Reserve Bank of New York shows that many are optimistic that inflation will continue to fall. Deutsche Bank Senior Economist Brett Ryan posits that gas prices are the most significant piece of the puzzle regarding consumer confidence, as it's something Americans use daily that directly impacts their finances.
"What [consumers] notice is, 'Wow, it just cost me double to fill the gas tank in my car relative to two months ago,'" Ryan told Business Insider.