Why a majority of Americans think the economy is already in a recession

Three of five Americans surveyed by Affirm say the US is in a recession. On average, most think it started 15 months ago.

• Three in five Americans think the US is in a recession, a recent Affirm survey found.
• On average, respondents said that the recession started in March 2023.
• The US economy hasn't met the official definition of a recession, and Wall Street still sees a soft landing.

While Wall Street cheers the country's economic momentum, outlooks among most Americans appear more gloomy, an Affirm survey reported.

The payments company found that three in five Americans think the US is currently in a recession. Respondents indicated that the downturn has lasted 15 months so far. On average, March 2023 was the cited starting point.

But, according to the traditional definition, no recession has materialized. US GDP would need to fall for two successive quarters for this to happen.

But in a lesson that keeps repeating this year, formal data is not always the best depiction of the on-the-ground sentiment.

Why are views so misaligned?

Inflation and rising living costs were top of the list reasons for why consumer sentiment is low, Affirm found. Seven out of 10 Americans see today's inflation rate as a burden on their financial futures, limiting their ability to save and plan ahead.

Respondents also cited hearing money complaints in their social circles, a cutback in spending among friends, and difficulty in paying off credit card debt.

"With confidence in the U.S. economy at a low point, consumers are urgently seeking ways to feel in control of their finances," Vishal Kapoor, Affirm's SVP of Product, said in a press release.

Similar conclusions have been drawn from other surveys released this year. A Northwestern Mutual report previously found that 51% of Americans see inflation as the biggest risk to their financial security, while a Primerica survey reported that 74% of middle-class households planned to cut back spending.

For its part, Wall Street has remained optimistic about the economy's trajectory, given that inflation has progressively come down from its pandemic highs.

For many, the fact that inflation currently stands around 3% backs the notion that the Federal Reserve will soon cut interest rates, easing pressure on the economy.

Amid these outlooks, Bank of America found that 68% of investors expect the world to achieve a soft landing. That's when inflation comes down without sparking a recession.

But for consumers, inflation remains high enough to dent budgets. Although spending kept up enough to stall an official recession, Americans have gradually pulled back their buying.

According to the Affirm survey, affected respondents are finding ways to cope. Methods include adopting new budgeting habits and making more strategic spending decisions. For instance, over half are open to "buy now, pay later" payment options.