Economic Mood Improves, but Inflation Still Vexing Americans

WASHINGTON, D.C. -- While still negative overall, Gallup’s Economic Confidence Index has improved each of the past two months to its highest point in two years, reflecting improved views of both current economic conditions and the economy’s direction. However, a steady majority of Americans continue to say recent price increases have created financial hardship for them.

Economic Confidence Improves to Highest Level in Two Years, but Still Low

Gallup tracks Americans' monthly ratings of national economic conditions and their views on whether the economy is getting better or worse. The combined responses are used to create the Gallup Economic Confidence Index (ECI), which has a theoretical range of +100 (if all respondents say the economy is excellent or good and that it is getting better) to -100 (if all say it is poor and getting worse).

The latest index score, from a Jan. 2-22 poll, is up by six points from last month and 14 points since November to -26, the highest since January 2022. The index has been in mostly negative territory since the beginning of the pandemic in 2020. It fell to -58 in June 2022, marking the worst reading since the Great Recession, as inflation reached its highest point in more than 40 years and gas prices set new records. Since then, it has fluctuated, showing modest signs of improvement last summer before worsening again.

The recent uptick in confidence comes at a time when national economic indicators are generally seen as solid or improving. Unemployment remains low, gross domestic product is beating expectations, the inflation rate is down from its high point, and the stock market -- which continues to surge -- hit a new high at the end of the latest poll’s field period.

Americans Slightly More Optimistic About Current Economic Conditions, Outlook

Though still in negative territory, Americans’ views of both components of the ECI -- current conditions and the economy’s trajectory -- have improved modestly.

The largest share of Americans, 45%, rate current economic conditions in the country as poor, while just over one-quarter describe conditions as excellent (5%) or good (22%) and another 29% believe they are only fair. In December, 22% of U.S. adults rated the economy as excellent or good.

Currently, 63% of Americans say the economy is getting worse, 30% say it is improving, and 4% think it is staying the same. Last month, 68% of Americans thought the economy was worsening.

The latest changes in Americans’ views of the economy and its trajectory are mainly owed to Democrats’ increased positivity. Democrats’ rating of the economy as excellent or good rose from 38% in December to 54% this month. Likewise, the percentage of Democrats saying the economy is getting better increased from 54% to 64% over the same period. At the same time, neither Republicans’ nor independents’ views changed significantly. Few Republicans, 8%, currently rate the economy as excellent or good, while the 21% of independents who offer the same rating is closer to the national average.

Inflation Continues to Affect a Majority of Americans

Despite modest improvements in Americans’ views of the national economic situation, there has been little change in the percentage who characterize recent price increases as a personal hardship.

Data from a nationally representative Jan. 2-16 web survey using Gallup's probability-based panel show 63% of U.S. adults say recent price increases have caused financial hardship for their family. This includes 17% who say it is a severe hardship affecting their ability to maintain their standard of living and 46% who report it is a moderate hardship but does not jeopardize their standard of living. Another 37% of Americans say inflation is not a hardship at all.

The current 63% saying rising prices are a personal hardship reflects a continuation of peak concern on this measure since Gallup started monitoring it in November 2021. In that initial reading, 45% reported a severe or moderate hardship. The rate inched up in 2022 even as inflation ebbed, perhaps reflecting the cumulative effect of higher prices rather than the rate itself.

Inflation’s Impact ‘Severe’ for Three in 10 Lower-Income Households

As has been the case in previous readings, Americans’ reports of high prices as a hardship have differed significantly based on annual household income. Those in lower-income households (76%) are more likely than those in middle-income households (64%) and higher-income households (54%) to say price increases are causing them hardship. However, income differences are even more pronounced when looking just at those saying the impact is severe. Lower-income Americans (30%) are three times as likely as high-income adults (10%) and almost twice as likely as middle-income adults (16%) to characterize high prices as a severe hardship.

Americans’ reports of the effects of high prices also differ significantly by party, with Republicans and independents describing the situation more negatively than Democrats. In all, 72% of Republicans and 64% of independents say inflation has been a hardship for them, compared with 51% of Democrats.

Bottom Line

As the presidential election year gets underway, Americans -- primarily Democrats -- are feeling more optimistic about the economy even as they are still feeling the sting of higher prices. The uptick in economic confidence coincides with a 41% job approval rating for Joe Biden, who averaged 39.8% in 2023.

Still, views of the economy remain largely negative, particularly among Republicans and independents, which could spell trouble for Biden as he seeks reelection.

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