Americans are feeling increasingly pessimistic about the economy — even as several measures of economic activity remain comparatively resilient.
Goldman Sachs economists say the disconnect may have a surprising explanation: Americans may simply be less happy and less confident about the broader direction of society.
In a recent analysis, Goldman Sachs economist Joseph Briggs argued that persistently weak consumer sentiment cannot be explained entirely by traditional economic indicators such as inflation, employment, household finances or stock-market performance.
Instead, broader pessimism — including declining happiness and trust in institutions — may be contributing to the unusually gloomy mood among consumers.
Consumer sentiment falls sharply again
The latest University of Michigan preliminary survey shows just how severe the deterioration has become.
The Consumer Sentiment Index fell to 47.8 in September 2026, down from 51.7 in August and 55.1 a year earlier.
That represents a 7.5% monthly decline and a 13.2% drop from September 2025. The index measuring consumer expectations fell even more sharply, dropping 11.1% from August.
The survey also found that Americans’ expectations for inflation over the next year jumped from 4.0% to 4.6%, the highest reading since June.
University of Michigan Surveys of Consumers Director Joanne Hsu said consumers were anticipating greater pressure on their finances as fuel prices and trade tensions intensified.
Reuters separately reported that the deterioration was driven in part by concerns over gasoline prices and inflation.
But here’s the unusual part
Normally, weak consumer sentiment would be expected to correspond with a clearly deteriorating economy.
The current picture is more complicated.
U.S. retail sales jumped 1.2% in August, according to government data reported by Reuters, marking the strongest monthly increase since March. The increase also exceeded economists’ expectations.
Core retail sales, which exclude several volatile categories, increased 1.4%. The stronger spending figures led some economists to raise their estimates for third-quarter economic growth.
That creates a striking contradiction:
Consumers are spending, but they don’t necessarily feel good about the economy.
And Goldman Sachs is examining whether the answer lies partly outside conventional economic statistics.
Goldman points to declining happiness
Briggs’ analysis draws on data from the University of Chicago’s General Social Survey.
According to the analysis, the share of Americans describing themselves as “very happy” fell to 23% in 2024 from 31% in 2016. At the same time, the share saying they were “not too happy” increased from 13% to 20%.
Goldman’s analysis found that overall happiness had deteriorated more than people’s assessment of their financial satisfaction.
That distinction matters.
A household can be relatively stable financially while still feeling pessimistic about the country’s direction, its future prospects or its broader social environment.
Goldman’s argument is therefore not that inflation has stopped mattering. Rather, it suggests that economic dissatisfaction may be only one component of a much wider decline in optimism.
Trust may be part of the equation
Briggs also examined the relationship between happiness and trust in institutions.
His analysis found that declining institutional trust accounted for a disproportionately large share of the decline in overall happiness in recent years.
That could help explain why consumer sentiment has remained unusually weak even when some economic indicators have improved.
Joanne Hsu has previously pointed to a similar pattern, noting that the long-term decline in consumer sentiment has occurred alongside measures showing declines in both happiness and trust in public institutions.
Inflation is still a major problem
The Goldman analysis does not mean consumers are imagining their financial pressures.
Prices remain elevated, while higher energy costs are putting additional pressure on household budgets.
Goldman Sachs Research previously estimated that growth in U.S. consumers’ discretionary cash inflows — money available after meeting financial obligations — would be 3.7% in 2026, down from its earlier estimate of 5.1%.
The bank has also warned that lower-income households are particularly vulnerable to higher energy and food costs.
So there are tangible financial reasons for consumers to remain cautious.
The puzzle is that those economic pressures don’t appear to fully explain the depth of the pessimism reflected in sentiment surveys.
Spending and confidence are telling two different stories
The divergence is becoming increasingly important for economists and investors.
On one side, Americans continue to spend.
On the other, consumer-confidence surveys suggest that many households are worried about inflation, their finances and the future.
A separate September survey from LSEG/Ipsos showed a somewhat different picture: its U.S. Primary Consumer Sentiment Index rose 1.1 points to 50.5, although it remained 1.9 points below its level a year earlier. Its jobs index was also 1.5 points above its September 2025 reading.
That difference between surveys is an important reminder that there is no single measure that perfectly captures how Americans feel.
Why Wall Street is watching
Consumer sentiment matters because household spending represents a major part of the U.S. economy.
If pessimism eventually causes consumers to delay purchases, reduce discretionary spending or increase precautionary savings, businesses could feel the impact through weaker sales.
But the opposite is also possible: households may continue spending despite their negative feelings, particularly when employment and income remain sufficiently supportive.
Retail executives have already described consumers as selective rather than completely absent from the market. At Goldman Sachs’ Global Consumer and Retail Conference this month, executives discussed shoppers making purchases around specific occasions while spending less per visit and remaining cautious about the holiday season.
That points toward a consumer who is still participating in the economy — but with greater caution.
The bigger question
Goldman Sachs’ analysis raises a question that could become increasingly important for economists:
What happens if consumer pessimism becomes partly disconnected from the traditional economic cycle?
If confidence remains depressed because of broader concerns about society, institutions and the future, sentiment could stay weak even during periods of economic growth.
That would make consumer-confidence surveys more difficult to interpret as straightforward indicators of future spending.
For now, the data tell a complicated story.
Americans are worried. Their sentiment has deteriorated sharply. Inflation expectations have climbed. Yet spending has remained resilient.
Goldman Sachs’ argument is that the missing piece may not be another economic statistic — it may be the broader decline in how Americans feel about their lives and the world around them.
And if that pessimism persists, the biggest question may not be whether consumers are unhappy today, but whether that unhappiness eventually changes how they spend tomorrow.
