Like President Joe Biden before him, President Donald Trump is trying to convince a dubious American public that the economy is strong and inflation isn’t a worry.
“The economy is booming,” President Donald Trump declared this week. “The stock market is higher than when I came into office (and) there’s no inflation.”
Gasoline prices, the president said, are lower than they were on Inauguration Day. Grocery bills are going down, too.
Americans aren’t feeling the president’s optimism. And there are plenty of reasons why.
Gas is about 8 cents a gallon higher since he took the oath of office on Jan. 20, based on AAA price estimates. The St. Louis Fed’s index of grocery prices is higher. And the last measure of inflation from the Commerce Department showed a year-on-year increase of 2.3% with prices rising faster in April than in March.
Bank of America data published on Thursday noted that consumer spending patterns moderated last month, and are showing signs of slowing more in the summer months. Spending is still positive for the year, though.
“Given that economic uncertainty remains very high amid the imposition of tariffs and corresponding price increases, we continue to keep a close eye on how the consumer is reacting,” the report said.
Real-time data from the Transportation Security Administration (TSA), shows the number of travelers moving through domestic airports this month is down about 2% from the first three weeks in April, one of the biggest monthly declines in years.
“The 5% drop in passenger numbers from their peak in December already is bigger than the 4% decline in February 2001 and the 1% dip in October 2007, the onset of the 2001 and 2007-to-09 recessions,” noted Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.
Broader measures of consumer sentiment are also souring. The University of Michigan’s benchmark survey fell to its second-lowest reading on record this month. Year-ahead inflation expectations, which are published in tandem, surged to 7.3%, the highest since November 1981.
That isn’t the kind of reading anyone wants for an economy powered by consumer spending and still clouded by tariff and inflation uncertainty.
The Atlanta Fed’s GDPNow forecasting tool, a real-time tracker of U.S. growth, suggests a current-quarter advance of 2.4%. But a surprise first-quarter economic contraction, along with revisions over the coming weeks, probably will deliver little growth over this year’s first half.
Summertime prospects are similarly cautious. GasBuddy, a consumer advocacy network, said fewer Americans are planning holiday road trips this year, even with what could to be the cheapest fuel prices since 2021.
“While we’re forecasting the lowest summer gas prices in years, economic jitters are slightly dampening optimism,” said Patrick de Haan, GasBuddy’s head of petroleum analysis. “Rather than canceling plans, travelers are becoming more strategic with their spending.”
The housing market also isn’t providing the kind of spark needed to ignite consumer spending. Existing home sales slumped to the slowest pace since 2009 last month, according to the National Association of Realtors. Rising mortgage rates could gum up the housing market while slowing refinancings and keeping home-equity loan opportunities in check.
Trump cleared a massive hurdle on Thursday in his effort to define his broader economic agenda when the House approved his “one big, beautiful” tax-and-spending bill.
But while the president can compel recalcitrant lawmakers into approving trillions of dollars in deficit spending—and probably will need to do so again when it reaches the Senate next month—a larger and more difficult challenge looms.
Trump finds himself in a space occupied by his predecessor, President Joe Biden, in having to explain to Americans why they are wrong to feel they way they do about the economy.
That’s never a good starting point to get them spending again.
Write to Martin Baccardax at martin.baccardax@barrons.com
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