Are markets experiencing a recession in numbers or in perception?

- Government and private studies reveal the error of relying on consumer sentiment to predict recessions

- Do not judge the economy by shopping malls or by the pessimism of gatherings... Look at what the numbers say and what people are doing

In an economic world governed by numbers on one hand, and narratives, fears, and expectations on the other, understanding this gap is essential to distinguishing between a genuine recession and one that begins first in people's minds.

Walk down the street and you will find cafes packed, shopping malls teeming with shoppers, and you will struggle to easily find a parking spot for your car. Yet, at the same time, you listen to conversations in gatherings and on social media, giving you the impression that the economy is on the verge of collapse, that "the market is stagnant," and that commercial activity is declining.

This paradox, experienced by several societies today amid political tensions and a continuous flow of negative news, raises an important economic and psychological question: Can an economy suffer a recession in people's minds more than it does in its actual figures?

Reality indicates that the economy does not always enter a crisis measured by a decline in GDP, rising unemployment, or shrinking spending; rather, it may sometimes fall victim to what can be described as an impression crisis. In some cases, sales, purchases, and consumer spending continue, while fear, pessimism, and generalized media coverage paint a darker picture, creating a collective sense that the economy is in a recession, even when actual indicators do not support this perception to the same extent.

It is precisely here that the importance of distinguishing between the economy as measured by numbers and the economy as felt by people becomes apparent. The gap between the two is not merely a transient phenomenon; it represents one of the key themes addressed by behavioral economics and has become a growing focus of interest for research institutions and policymakers.

In their book *The Spirit of the Markets: How Human Psychology Moves the Economy, and Why It Matters for Global Capitalism*, economists George Akerlof and Robert Shiller provide an in-depth analysis of the role played by psychological forces in shaping the fate of economies and the wealth of nations.

From excessive belief in the continuous rise of real estate prices to the sudden collapse of confidence in financial markets, economies are not driven by numbers and calculations alone; they are also governed by collective feelings of optimism, fear, trust, and anxiety.

These are the forces the authors discuss within the concept of the "spirit of the markets," linked to what is known in economic thought as "animal spirits," considered one of the influential drivers of economic and investment behavior.

Akerlof and Shiller challenge in this work several long-standing assumptions that dominated traditional economic thought, foremost among them the reduction of economic behavior to rational decisions governed by self-interest and cold calculations.

Instead, they place human psychology at the heart of economic analysis, based on the premise that understanding prosperity, contraction, and financial crises is incomplete without understanding the psychological and social motivations behind the decisions of individuals, institutions, and markets.

In this context, the authors revive the concept of "animal spirits" used by economist John Maynard Keynes to describe the impact of fluctuating psychological motivations on economic and investment decisions. Excessive optimism may push markets to inflate bubbles, while fear and loss of confidence can lead investors and consumers to postpone their decisions and freeze spending and investment, thereby exacerbating and prolonging economic slowdowns.

People do not engage with the economy by reading GDP reports or productivity data; rather, they often construct their perception of it through circulating news, personal stories, daily conversations, and the rising prices of certain goods and services.

Consequently, an individual may feel that the economy is in poor shape even if their income is stable or rising, and may believe that everyone is suffering financial hardship, while data indicate continued spending and labor market growth.

The authors demonstrate that ignoring these psychological factors in certain economic theories and policies, particularly during the era when faith in markets’ ability to self-correct intensified, led to a flawed understanding of the nature of crises and the limitations of models based on assumptions of full rationality and rational expectations.

Thus, *The Spirit of the Markets* offers an intellectual framework that helps explain the causes of economic and financial disruptions and how to address them. It does not merely diagnose crises; it urges policymakers to recognize that the psychological forces driving the economy are not a marginal factor, but an integral part of economic reality itself.

As the book emphasizes, the economy is governed not only by equations, but also by human psychology, encompassing confidence, fear, hope, and impulsiveness.

This question is no longer merely a theoretical debate. A research paper published by the Federal Reserve Board as part of its “Fed Notes” series revealed a clear gap between American consumers’ negative outlook on the economy and their actual purchasing behavior.

The data showed that, despite a sharp decline in consumer sentiment reaching levels that, in some indicators, approached those of previous crisis periods, consumer spending and household purchases continued to demonstrate resilience and growth compared to pre-pandemic levels.

The study relied on detailed data on daily purchases by thousands of households and concluded that the perception of deteriorating financial conditions is not necessarily linked to declining incomes. In many cases, the source of distress was the extra effort and psychological adjustment required to cope with rising prices and living costs.

The study also showed that consumers may tend to overestimate the inflation rates they actually experienced, and that their assessment of the economic situation is influenced by price increases to a greater extent than by wage growth or improvements in their individual incomes. This explains a significant aspect of the paradox: a consumer may be able to spend and continue buying, yet simultaneously feel that their economic situation is worse, because what they buy today has become more expensive, and because their memory compares current prices with those of previous years rather than comparing their current income with their past income.

The research paper concluded that the discrepancy between what consumers say in opinion polls and what they actually do with their money makes consumer sentiment indicators insufficient on their own to judge future economic trends or measure the health of the economy.

This idea is supported by a recent analytical study from the macroeconomics center of the Boston Consulting Group, which concluded that consumer sentiment indicators have, in some cases, become a source of numerous false alarms, and that relying on them as a sole or precise indicator of economic health can lead to a misleading interpretation of reality.

وأظهرت التحليلات أن مخاوف التراجع والضعف الاقتصادي التي سادت الأعوام الأخيرة استندت بدرجة كبيرة إلى الانطباعات التشاؤمية للمستهلكين، في حين استمر الإنفاق الاستهلاكي الحقيقي في النمو، متجاوزاً في بعض الفترات تلك التوقعات القاتمة.

وأرجعت الدراسة هذا الانفصال إلى مجموعة عوامل، بينها ما وصفته بتشاؤم المسافة والاستقطاب الحزبي. ويقوم المفهوم الأول على مفارقة لافتة: إذ يرى كثير من الناس أن أوضاعهم المالية الشخصية جيدة أو مقبولة، لكنهم في الوقت نفسه يعتقدون أن الاقتصاد الوطني في وضع سيئ.

ووفقاً لما أوردته الدراسة، يرى نحو 75 % من المستهلكين أن أوضاعهم المالية الشخصية جيدة أو مريحة، بينما تتراجع هذه النسبة إلى نحو 25 % عندما يتعلق السؤال بتقييم وضع الاقتصاد الوطني. ويكشف هذا التناقض أن الفرد قد يحكم على واقعه الشخصي من خلال تجربته المباشرة، بينما يبني نظرته إلى الاقتصاد العام على الأخبار والخطاب الإعلامي والجدل السياسي والانطباعات السائدة.

كما أشارت الدراسة إلى أن الاستقطاب السياسي قد يؤثر في تقييم الأفراد للاقتصاد، بحيث تصبح بعض الإجابات في استطلاعات الرأي انعكاساً للمواقف السياسية والمخاوف العامة بقدر ما تكون تقييماً مباشراً للبيانات الاقتصادية.

هذا لا يعني، بطبيعة الحال، أن ازدحام المقاهي والمجمعات التجارية يكفي وحده للحكم على سلامة الاقتصاد، أو أن استمرار الإنفاق يعني بالضرورة غياب المشكلات الاقتصادية. فقد يستمر الاستهلاك حتى في ظل ارتفاع الديون أو تآكل المدخرات، وقد تخفي الحركة التجارية القوية اختلالات أخرى في سوق العمل أو الاستثمار أو توزيع الثروة.

وربما تكون الرسالة الأهم التي يذكرنا بها الاقتصاد السلوكي، أنه لا تحكم على الاقتصاد من ازدحام المجمعات التجارية وحده، ولا من تشاؤم المجالس وحده. انظر إلى ما تقوله الأرقام، وراقب ما يفعله الناس، ثم حاول أن تفهم القصة النفسية التي تقف بين الاثنين.

اختزال تقييم الاقتصاد في الشعور العام بالتشاؤم، أو التعامل مع الأحاديث اليومية واستطلاعات المزاج باعتبارها دليلاً قاطعاً على وقوع الركود. يشكل خطأً مقابلاً لا يقل خطورة.

والنتيجة الأكثر دقة أن الاقتصاد يعيش دائماً على مستويين متداخلين: مستوى الأرقام والوقائع، ومستوى التصورات والمشاعر. وقد يتطابق الاثنان في أوقات الأزمات الحقيقية، لكنهما قد يفترقان أيضاً لفترات طويلة.

وهنا تكمن المفارقة التي نراها في الشارع: قد يتحدث الجميع عن تراجع السوق، بينما تستمر حركة الشراء. وقد يعلن الناس أنهم قلقون على مستقبلهم المالي، بينما يواصلون السفر والتسوق والإنفاق. وليس بالضرورة أن يكون أحد الجانبين كاذباً؛ فقد يكون الشعور حقيقياً، حتى عندما لا تعكسه الأرقام بالقدر نفسه.