Americans are growing increasingly pessimistic about the outlook for the economy following a turbulent year of soaring inflation, rising gas prices, and decreased purchasing power, a new survey has found.
McKinsey, alongside opinion-polling firm Ipsos, surveyed 2,010 Americans in the fall of 2022.
When it comes to access to economic opportunity, it’s apparently perceived by many as becoming increasingly out of reach, with McKinsey’s scores of U.S. economic outlook, which is scaled from 0 to 200, showing a 14-point drop, from 99 to 85, in overall economic sentiment compared to a similar survey conducted just six months ago.
The latest survey also showed an 18-point drop compared to the results of a similar survey conducted a year ago.
“Unlike previous surveys, the lack of optimism cut across all income levels, genders, and ages, with the sharpest declines among those aged 25 to 34 years old—a group we would expect to be optimistic given they are at the start of their careers and in a relatively job-rich economy,” McKinsey noted.
Analysts noted that this could be attributed to the fact that those aged between 25 to 34 years tend to be saving up to purchase their first home, but with today’s soaring interest rates, they are likely facing an uphill battle.
Fed Set to Hold Policy Meeting
Many older Americans, meanwhile, may be on fixed incomes, which could leave them struggling with the rising cost of living, while wealthier Americans may have turned to their financial savings amid rising prices, according to McKinsey.Elsewhere, the survey found that 19 percent of American households are spending less on groceries as prices for food and household items have risen throughout the year, while 19 percent said they have cut down on transportation and 10 percent have decreased spending on healthcare.
In addition, 24 percent of those surveyed by McKinsey said they have seen a decline in their debt payments or savings as interest rates rise on the back of the Federal Reserve’s move to cool down red-hot inflation.
Inflation rang in at 7.7 percent year over year in October, while median wages grew 6.4 percent, according to the Federal Reserve Bank of Atlanta’s Wage Growth Tracker. That effectively means that American household income today provides far less purchasing power than it did six months to a year ago.
“In a context in which price gains outstrip wage growth, more respondents than last year believe America is doing a poor job of providing opportunities for all people. And they expect that the trend will continue for themselves and the country in a year and five years from now,” McKinsey noted.
November’s inflation report is expected on Tuesday, with economists widely anticipating data to show that the Consumer Price Index (CPI) rose just slightly in November.
Federal Reserve Chair Jerome Powell indicated at the end of November that the central bank could slow the pace of interest-rate increases as early as mid-December. The central bank is set to hold its policy meeting on Dec. 13–14.
