Ukrainian Conflict and U.S. Confidence

Episode Summary

Executive Summary: The episode centers on the economic and survey-data implications of the Russia-Ukraine crisis, inflation, supply chains, labor market strength, and the disconnect between weak consumer sentiment and still-solid spending. Morning Consult’s John Leer explains how high-frequency survey data reveal shifting consumer concerns from COVID to inflation, energy, and financial vulnerability, while Moody’s economists assess likely macro effects as limited unless the conflict escalates.

Main Topics: Russia-Ukraine baseline and macroeconomic risk (Priority: 5/5): Chris DeRees outlines Moody’s baseline: Russia may intensify pressure on eastern Ukraine/Donbass, with sanctions and elevated energy prices, but without a full-scale invasion of Kyiv or broad systemic economic shock under the base case. Morning Consult’s survey model and high-frequency data (Priority: 5/5): John Leer explains Morning Consult’s global data-intelligence approach, including 35,000 daily interviews across 45 countries, and how frequent, demographically rich surveys improve real-time economic analysis and forecasting. Energy prices, inflation, and consumer psychology (Priority: 5/5): The group links the conflict to oil and gas volatility, higher gasoline prices, and inflation expectations, noting that consumers in more Russia-dependent European economies are already signaling more strain. Consumer sentiment versus consumer spending (Priority: 4/5): The conversation contrasts very weak sentiment readings with still-strong retail spending, with Leer arguing that jobs and wage gains partly explain the mismatch and that sentiment is more sensitive to downside shocks than upside recovery. Labor market recovery and long-term unemployment (Priority: 4/5): A statistics game centers on long-term unemployment, highlighting that the labor market has recovered far faster than after the Great Recession and that long-term unemployment has snapped back unusually quickly. Housing supply constraints and pipeline backlog (Priority: 4/5): Another statistics game focuses on homes under construction, underscoring record-high inventory in the pipeline, supply-chain bottlenecks, and the expectation that housing shortages and affordability problems will take time to resolve. Supply chains easing, but unevenly (Priority: 3/5): Participants discuss signs that U.S. supply-chain disruptions may be peaking and slowing, while noting persistent shortages in certain categories and stronger disruptions in places like Australia.

Key Arguments: Russia’s baseline economic impact is likely limited if fighting stays in eastern Ukraine, though energy prices and sanctions would remain elevated. Europe is much more exposed than the U.S. because of dependence on Russian gas, making consumer and market reactions stronger there. Gasoline and inflation expectations materially influence U.S. consumers, but gasoline’s share of spending is lower than in past cycles, muting the aggregate drag. Consumer sentiment has worsened far more than consumer spending because labor income is still supporting demand and households are buying goods heavily relative to services. High-frequency online surveys help capture real-time shifts in confidence, financial vulnerability, shortages, and geopolitical attitudes better than lower-frequency traditional surveys. Supply-chain pressures appear to be plateauing in several U.S. categories, suggesting future inflation pressure may ease as inventories normalize. Long-term unemployment has fallen much faster than in prior recoveries, signaling a much stronger labor-market rebound than after 2008-09. Household financial stress remains elevated, especially among lower-income groups, and could be worsened by the expiration of pandemic-era supports and smaller tax refunds.

Data Points: Morning Consult interviews: 35,000 daily interviews - John Leer describes Morning Consult’s global survey operation. Countries surveyed: 45 countries - Morning Consult’s global coverage. Morning Consult employee growth: 120 to 500+ employees - Company growth during the pandemic. Series B valuation: $1 billion - Morning Consult’s fundraising milestone. Russia-dependent European gas share: About one-third - Moody’s discussion of Europe’s exposure to Russian gas. WTI oil price: Around $90 per barrel - Used to illustrate oil’s pre-existing risk premium. Gasoline spending share: 2% of total consumer spending - Ryan updates the U.S. gasoline share of nominal consumption. Electricity share of spending: 1.5% - U.S. consumer spending on electricity. Natural gas share of spending: 1.5% - U.S. consumer spending on natural gas. Long-term unemployed: 1,691,000 - Chris’s statistics-game number: people unemployed 27 weeks or longer. Homes under construction: 1.54 million - Chris’s housing statistic; record high pipeline of homes under construction. Single-family/multifamily under construction: 760,000 each - Split of the 1.54 million homes under construction. Control retail sales above trend: 12.5% - Ryan’s retail-sales statistic showing goods spending far above pre-pandemic trend. Supplier delivery expectations: -21.3% (or -22.3% as stated) - Philly Fed-style survey measure indicating expectations for faster deliveries and easing supply-chain pressure. Three-year inflation expectations: 3.5% - John’s statistic from the New York Fed survey, described as having rolled over. Financial vulnerability: 29% - Share of adults lacking savings to cover basic monthly expenses in January. Prior financial vulnerability range: 21%-22% - Typical level before January’s jump. People wanting full-time work but stuck part-time: 55%-60% - Share of part-time workers wanting full-time hours, up from 30%-35% in June. Australia grocery shortage spike: +26 percentage points - Share of Australians unable to find desired grocery items in January. U.S. grocery shortage incidence: 47% - Share of adults trying to buy groceries who encountered out-of-stock items in January. U.S. grocery shortage prior level: 41% - Comparable share in November. U.S. car shortage incidence: 28% - Share encountering shortages in new/used cars, roughly flat over six months. January tax refund change: $800 lower on average - Compared with the prior year, potentially reflecting the child tax credit change.

Pivotal Quotes: "“We’re pairing this real-time data with sort of cutting edge analysis.”" — John Leer: Describing Morning Consult’s business model and approach to economic measurement. "“The conflict is already embedded in oil price to some degree.”" — Mark Zandi: Discussing how Russia-Ukraine risk is already reflected in energy markets. "“There was a diminishing impact of cases essentially on consumer confidence.”" — John Leer: Explaining how COVID became less central to consumer sentiment over time.

Implications: Listeners should expect inflation and energy volatility to remain the near-term macro risk, while housing supply and labor-market healing may gradually offset some pressure. Survey data suggest consumers remain stressed, but spending and employment still provide a cushion.