Inside Economics Podcast #302- Survey Says...

The discussion centered on how the Iran war and higher energy prices have reshaped inflation, consumer sentiment, and the policy debate. The host and an analyst argued that the shock is still mostly showing up through gasoline, diesel, transportation, and imported inputs, with headline CPI running hotter while grocery inflation has been surprisingly soft because consumers are trading down and demand is weakening in some categories. They also said the more persistent inflation risk would come from second-order effects, such as wages, but that those signs have not clearly materialized yet.

John Leer said Morning Consult’s surveys show a broad deterioration in sentiment since the Iran war, after consumers had briefly improved as tariff uncertainty eased. He said the weakness is spreading beyond lower-income households and is now visible across many regions, with Republicans recently turning more negative as the conflict has persisted. He also said consumer worries are increasingly tied to affordability, housing, and data centers, which he sees as a potentially important political and regulatory issue.

On policy, the panel debated whether the Federal Reserve should tighten further. The analyst said AI-related inflation is visible in import prices and capital goods, but that higher rates may not slow AI much and could instead weaken the rest of the economy. Leer said the consumer is still hanging tough, but only because households are making increasingly careful spending adjustments and allocating away from housing and other big expenses.