SCOTT SIMON, HOST:
Stock market is up. Gas prices are down. And ordinary Americans may be feeling a little better about the economy. NPR's chief economic correspondent Scott Horsley joins us. Scott, thanks so much for being with us.
SCOTT HORSLEY, BYLINE: Great to be with you, Scott.
SIMON: There are some new polling numbers, right?
HORSLEY: There are. And what they tell us is that things are looking up a little bit. We're talking about the University of Michigan's survey of consumer sentiment. And it shows that people felt better about the economy in January than they did in December, and they felt better in December than the month before that. In fact, over the last two months, we've seen the biggest improvement in consumer sentiment in more than three decades. Now, don't start playing "Happy Days Here Again" just yet. On the whole, people's economic attitudes are still not all that sunny, but they are moving up. And Joanne Hsu, who runs the Michigan survey, says this is an important inflection point.
JOANNE HSU: They're feeling OK. Trending upwards, feeling OK, but not great.
HORSLEY: You know, for a while there's been a lot of talk about the apparent disconnect between a lot of the economic data, which shows, you know inflation's coming down; unemployment's really low; the economy's growing at a pretty healthy clip; and surveys, which show people are still pretty gloomy. You wrote about that disconnect in your newsletter this week, Scott. What this new survey tells us is that people are starting to take note of all the positive economic developments, and their gloom is starting to lift just a bit.
SIMON: Scott, what might be behind the shift?
HORSLEY: You know, it's probably a combination of things. But a couple obvious candidates might be the price of gasoline, which is hovering close to $3 a gallon nationwide - lower than that in a lot of states - and the stock market, which has been hitting record highs. In fact, the S&P 500 index closed at an all-time high just yesterday. Even though most people don't own a lot of stock, a rising market tends to make people feel a little better.
And, of course, gas prices are always something people pay attention to. It's no coincidence that the worst consumer sentiment ever recorded was back in the summer of '22, when gas prices were at their all-time peak. Pump prices are a lot lower now. And even with all the turmoil we've had in the Middle East in the last few months, gas prices have not spiked the way people might have feared. That seems to be helping people feel more confident that the progress we've seen on inflation is here to stay. Overall, prices are still higher than people would like - no question about that. But they do see the trend line moving in a positive direction.
SIMON: And what are the political consequences potentially?
HORSLEY: President Biden's approval rating on the economy is still quite low, but the first step of getting out of a hole is to start going up rather than down. So I'm sure his campaign advisers are watching these sentiment numbers closely. Overall, sentiment is still below the long-run average, but it is trending up - more so for Democrats and independents. But even among Republicans, sentiment is getting better. Hsu says that is an indication of just how widespread this turnaround has been.
HSU: Notably, we saw improvements in sentiment across all demographic groups - across income, age, education, geography. It was really a consensus. This isn't something that happens often. So this is not a blip in the pattern. This really is an improvement.
HORSLEY: The last time we saw a two-month turnaround this big was back in 1991, when the U.S. was just coming out of a recession. Of course, this time around, we didn't have a recession. We actually had a pretty good economy, even if a lot of people didn't feel like it. I will say that improvement in sentiment back in 1991 was not enough to save the first President Bush. He went on to lose his reelection bid the following year to Bill Clinton. Obviously, a lot can happen between now and November. But for the moment at least, economic sentiment is moving in a positive direction.
SIMON: NPR's Scott Horsley. Always a pleasure to talk to you. Thanks so much for being with us.
HORSLEY: Good to be with you.
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