What Do I Need to Know About the Current State of the Economy?

Q: I find financial news to be confusing. What do I need to know about the current state of the economy and how can I learn to read the financial news? 

A: Financial news can truly be confusing. Here, we’ve outlined the factors you need to know about today’s economy and provided you with a primer on how to read the financial news. 

Which factors characterize the economy now? 

While your grocery bills may have you thinking otherwise, there’s actually good news on the economic front … right now, at least! The consumer price index (CPI), which tracks the cost of household staples, rose 4.9% in April of 2023. That’s its smallest increase in two years. The inflation readings of the U.S. Bureau of Labor Statistics report weakening inflation for 10 consecutive months since its peak in June of 2022. This means consumers should be seeing relief in staple categories like food, energy, and housing. 

But, the state of the economy is measured by more than the inflation rate alone. Consumer spending, for example, has weakened in recent months after a spike in January. Also, the U.S. Gross Domestic Product (GDP) rose at an annual rate of 1.1% in the first quarter of 2023, falling short of the 1.9% that economists had expected. It’s also important to note that interest rates now average 5-5.25%, its highest since 2007. On the flip side, though, new home sales rose in March for the fourth straight month.

While the economy has definitely seen better days, inflation is easing, and there’s hope for more good news in the coming months and years. As a consumer, look out for fluctuating interest rates and a decreasing rate of inflation. Remember: It’s important to practice responsible money management in any economic climate. 

How to read the news

Follow these tips to make sense of the financial news:

First, read both professional and amateur content. The articles you’ll read at The Wall Street Journal and The New York Times may have more reputable sources than your average basement blogger, but they’re also written with deadlines and the company’s quarterly earnings in mind. Be wary of clickbait and doomsday headlines. Amateur writing may be less sourced, but it’s also likely to be less biased and dramatic.

Next, remember that not every news story is actionable. You may read dozens of articles on the economy each week, but few of them require you to take action. Ignore most of what you read about the stock market because it’s usually best to keep your investments in place for years for optimal growth. You also don’t need to take any action when reading about inflation highs and lows, the GDP, or most other financial news items. Instead, read these articles to broaden your understanding of the state of the economy.

Financial news can be confusing. Use this guide to learn what you need to know about the current state of the economy and how to read financial news.