Americans are still worried about their financial stability even as their recession fears lessen. High prices at the grocery store and consumers’ memories of their pre-pandemic budgets may be playing a role. Here’s what financial and economic experts have to say about what last week’s economic indicators tell us about people’s perception of the economy.

What is driving consumer confidence?

The Consumer Confidence Index, released by the business nonprofit and research organization the Conference Board, is a survey indicating how optimistic or pessimistic consumers feel about their financial well-being and the economy.

The Consumer Confidence Index fell slightly in March from 104.8 to 104.7, well below some economist expectations of 106.5. Although consumers’ perception of the likelihood of a recession fell this month, consumers were less confident about their family’s financial situation in the next six months. The percentage of consumers who expected their incomes to fall rose from 11.9% in February to 13.8% in March.

Elizabeth Pancotti, director of special initiatives for the Roosevelt Institute, said that consumers’ experience of the economy and their financial situation may come down to crises they’re feeling that may not show up at a macro level but may strike their budgets particularly hard.

“When egg prices finally come down and chicken prices finally come down, but orange juice is high because of some random citrus greening disease or some other shocking food item, your total grocery bill doesn’t come down and that really highlights it,” she said.  “There’s one crisis after another at a micro level, which I think is really why we’re not seeing that divergence between overall economic strength and at a very micro level, the feelings of average consumers.”

Pancotti acknowledged that housing is also one of the highest expenses for consumers right now, and those prices aren’t showing as much movement as other areas of consumers’ budgets.

“For most families, it is the largest purchase they make every month,” she said.

Why isn’t consumer sentiment higher?

Consumer sentiment, a smaller survey conducted by the University of Michigan, also gauges people’s sense of the economy overall, the labor market, and how they see inflation. On Thursday, U.S. consumer sentiment jumped to 79.4 from 76.9 in February and 62 a year earlier, making this its highest level since July 2021.

Joanne Hsu, director of the survey, said in the report that this number is an indication that consumers believe the economy is “holding steady.”

“As the election season progresses and debates over economic policy become more salient for consumers, their outlook for the economy could become more volatile in the months ahead,” she added.”

Kevin Kliesen, business economist and research officer at the Federal Reserve Bank of St. Louis, said consumer confidence and consumer sentiment are still far below pre-pandemic levels and that it’s a puzzle as to why when the economy has “been growing fairly strongly” in the past year and a half. But like Pancotti, he added that high prices at the store compared to pre-pandemic prices may be playing a role in those measures.

“If you’re like me, you look at something, and you go, ‘Oh my gosh. I remember when it was so much less before the pandemic.’ So I think that calls into question, probably, a lot of people’s perceptions of the overall state of the economy and importantly their consumer finances,” he said.

What can we expect from inflation and the Fed?

As the Federal Reserve looks to its favorite inflation measure, the personal consumption expenditures price index, economists are watching the PCE closely for signs the Fed will cut rates in the coming months. This policy change is expected to have effects on the housing market as well as the growth of businesses.

The PCE rose 0.3% from January to February and 2.5% over the past year, according to the  Bureau of Economic Analysis’s Friday release. Fed Chairman Jerome Powell responded to the news when he spoke at the San Francisco Fed and said the numbers were “in line with expectations” but not as reassuring as the numbers Fed officials saw last year.

Despite this reception from Powell, some financial experts believe inflation will ease up soon. Cristian Tiu, associate professor of finance at the University at Buffalo, said that although the economy is adding jobs, he doesn’t believe the quality of those jobs is high enough to sustain this price growth for much longer.

“Prices basically on consumer goods can’t be driven up forever just by the very top of the wage distribution. The rest of the wage distribution actually looks pretty modest. So I don’t think these price increases can actually be sustained,” Tiu said.

For this reason, he doesn’t think the Fed should continue to put brakes on the economy through restrictive monetary policy. Tiu added that he sees inflation as driven partly by corporate profit-seeking, with companies taking advantage of inflation to continue to keep prices higher than they can justify for the American consumer.