Survey Shows U.S. Consumer Sentiment Near Historic Lows Despite Steady Spending
Americans’ view of the economy has sunk to near record lows. And once again, the contradiction at the heart of the U.S. recovery is back in focus. The nation’s households say they are worried, yet many are still opening their wallets.
The University of Michigan’s long-running consumer sentiment survey placed its September reading at 55.1, one of the lowest points in records that stretch back to 1952. Since the end of World War II, Americans have reported bleaker readings only a handful of times, typically in moments of profound economic stress, such as the oil shocks of the 1970s, the Great Recession of 2008, or the early months of the 2020 pandemic.
This time, the culprit looks familiar. Inflation has cooled from its peak, but fears of prices climbing again have flared after President Donald Trump announced a new round of tariffs on trucks, pharmaceuticals, and household goods, including furniture. Tariffs ripple quickly through supply chains, raising concerns that another round of price hikes is on the way, just as families had begun to catch their breath.
Households aren’t only worried about grocery bills and rent. They’re watching the labor market, too. “Consumers continue to express frustration over the persistence of high prices, with 44% spontaneously mentioning that high prices are eroding their personal finances, the highest reading in a year,” said Joanne Hsu, the survey’s director.
“Interviews this month highlight the fact that consumers feel pressure both from the prospect of higher inflation as well as the risk of weaker labor markets.”
Jobs remain plentiful by historical standards, but the momentum is slowing. Unemployment sits at 4.3%, which is low, but no longer at the rock-bottom levels of 2022. People who lose their jobs are taking longer to find new ones. Those warning signs pushed the Federal Reserve to cut interest rates last week, its first reduction since December, in an attempt to cushion the slowdown.
The gloom does not match the cash registers. Government data show consumer spending rose 0.6% in August, or 0.4% after adjusting for inflation. That jump came in the thick of the back-to-school rush, but it’s consistent with a broader pattern. In recent years, Americans have often told pollsters they feel pessimistic, only to proceed and splurge anyway.
In 2022, when inflation hit 40-year highs and sentiment collapsed to its lowest point ever recorded, spending on travel, concerts, and restaurants surged. In 2023, when political gridlock in Washington rattled confidence, the pattern repeated. Richmond Fed President Tom Barkin summed it up on Friday.
“Recent data show consumers resumed spending over the summer, especially those with higher incomes. And why wouldn’t they? Unemployment is still low, nominal wages are still increasing, and asset valuations are near all-time highs.”
That last point is crucial. The U.S. economy is increasingly being powered by the upper tier of earners. High-income households, buoyed by rising paychecks, booming stock portfolios, and strong home values, account for the lion’s share of discretionary spending. By contrast, low- and middle-income families are squeezed hardest by everyday prices and more likely to cut back.
In a statement to CNN, Stephanie Guild, chief investment officer at Robinhood, framed it bluntly.
“It’s the higher-income people in the country who do the majority of the spending, and those are the same people who are more likely to have investments.”
The stock market is reinforcing that divide. Major U.S. indexes have touched record highs in recent months, lifted by optimism over artificial intelligence, expectations of easier Fed policy, and solid corporate earnings. Even Trump’s tariff announcement, which sparked fears of higher consumer costs, was greeted on Wall Street with a rally strong enough to end a three-day losing streak.
That resilience has a feedback loop. Families who own equities, or have retirement accounts linked to them, report steadier confidence, Hsu noted.
“Sentiment for consumers with larger stock holdings held steady in September, while for those with smaller or no holdings, sentiment decreased.”
Guild added that the psychological comfort shouldn’t be underestimated. “With the market at record highs, despite the last few days, I definitely think it makes people feel comfortable about their savings,” she said.
The U.S. economy finds itself in a peculiar position. On paper, the fundamentals still appear solid: unemployment remains at historically low levels, spending has not collapsed, and corporate earnings are strong. Yet the narrative inside American households is sour, shaped by grocery bills, rent checks, and the daily headlines about tariffs and inflation.
Economists caution against taking sentiment as a crystal ball, as recent history has shown that gloomy surveys don’t always translate to empty shopping carts. But they also warn that if labor market weakness deepens or price increases accelerate, households could shift from complaining about the economy to actually retreating.
For now, the disconnect holds. Americans say they are bracing for the worst, but many are still living like the economy is strong.
Moumita Basuroychowdhury is a Contributing Reporter at The National Digest. After earning an economics degree at Cornell University, she moved to NYC to pursue her MFA in creative writing. She enjoys reporting on science, business and culture news. You can reach her at moumita.b@thenationaldigest.com.