US Consumer Sentiment at Lowest Level Ever Recorded

The University of Michigan Consumer Sentiment Index, which has tracked American economic attitudes since 1952, dropped to its lowest level in the survey’s history. The number is striking not because consumer sentiment fluctuates — it always does — but because the reading was lower than during any previous recession, financial crisis, or economic shock in seven decades of measurement.

What the Index Measures

The index is derived from a telephone survey of about 500 households each month. Respondents answer questions about their current financial situation, their expectations for the future, and their assessment of economic conditions broadly. The responses are aggregated into a single number, with the baseline of 100 representing the average sentiment in 1966.

Historic lows mean that Americans feel worse about their economic situation and prospects than they did during the 2008 financial crisis, the early 1980s recession, or the oil shocks of the 1970s. That is a remarkable statement given that unemployment during this period was historically low.

The Disconnect

Here is the puzzle: several traditional economic indicators were strong when sentiment hit bottom. Unemployment was near historic lows. GDP was growing. The stock market, while volatile, was well above pre-pandemic levels. By conventional measures, the economy was performing well.

But consumers were miserable. The explanation lies in what the traditional indicators do not capture:

Inflation at the grocery store. Official inflation figures are aggregated and smoothed. The consumer experience is specific and immediate: eggs doubled in price, rent increased 20%, gas costs more every week. The lived experience of inflation — paying more for the same goods — is visceral in a way that aggregate GDP growth is not.

Housing affordability crisis. A strong jobs report means nothing to the family that cannot afford to buy a home because prices increased 40% in three years while their income increased 15%.

Savings erosion. Pandemic-era savings, which briefly cushioned household balance sheets, were spent down by inflation. The safety net disappeared.

Political polarization. Research shows that consumer sentiment has become increasingly correlated with political identity. Partisans of the party out of power report dramatically lower sentiment regardless of economic conditions. This partisan lens distorts the signal.

What It Means

Record-low consumer sentiment alongside decent macroeconomic indicators suggests that the standard way economists assess economic health is incomplete. GDP growth that accrues primarily to corporations and high-income households does not improve sentiment for the majority. Low unemployment means little if the jobs pay less in real terms than they did five years ago.

The sentiment number is a measure of how people feel, and people feel squeezed. The bills are higher. The savings are thinner. The future feels uncertain. No amount of positive GDP data changes the experience at the checkout counter.