Our coverage includes global equity markets, focusing on earnings trends, institutional flows, and sector-level performance analysis. American consumers have remained deeply pessimistic about the economy for an extended period, with the University of Michigan Surveys of Consumers recently hitting all-time lows in May. Economists now question whether households will ever regain their pre-pandemic financial optimism, pointing to cumulative shocks from inflation, geopolitical turmoil, and ongoing trade disruptions as key factors eroding confidence.
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- The University of Michigan Surveys of Consumers hit an all-time low in its May preliminary reading, marking a fresh low point in post-pandemic sentiment.
- Several other consumer opinion surveys confirm the trend, with confidence metrics consistently below pre-pandemic baselines.
- Economists attribute the enduring negativity to a series of overlapping shocks: the initial pandemic, subsequent inflation spikes, war-related price volatility, and trade disruptions tied to Trump-era tariffs.
- Even as headline inflation cools, consumers appear to be "scarred" by the memory of rapid price increases, suggesting a persistent behavioral shift.
- The Conference Board’s alternative confidence index, which Shulyatyeva helps compile, also reflects subdued sentiment, though with slightly different nuances.
- The lack of any significant rebound in confidence raises questions about the effectiveness of monetary and fiscal policy in restoring public trust.
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Key Highlights
A closely watched barometer of consumer sentiment—the University of Michigan Surveys of Consumers—recorded its lowest levels on record this month, according to a preliminary reading released last week. The survey is just one of several indicators showing that Americans have failed to recover their economic confidence since the Covid-19 pandemic began more than six years ago.
Economists told CNBC that consumers remain scarred by years of rapid price increases, even as the annual inflation rate has moderated in recent months. On top of that, households are exhausted by a series of economic disruptions that have defined the current decade—including the pandemic, war-related supply chain turmoil, and the imposition of tariffs under President Donald Trump.
"It's a series of shocks," said Yelena Shulyatyeva, senior economist at the Conference Board, which conducts another widely followed gauge of economic confidence. "Consumers don't get a break."
The prolonged pessimism has puzzled some analysts, especially as broader economic indicators such as employment and GDP growth have remained relatively solid. However, the disconnect between macro data and personal financial sentiment suggests that household perceptions are lagging behind official figures, potentially dampening spending and saving behavior.
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Expert Insights
The sustained consumer pessimism presents a challenging puzzle for economists and policymakers alike. With the University of Michigan survey reaching uncharted depths, the data suggests that traditional economic recovery models may not fully capture the current cycle.
Yelena Shulyatyeva's observation that "consumers don't get a break" highlights a cumulative psychological burden. Each new shock—whether from inflation, tariffs, or geopolitical instability—may reset the baseline for consumer expectations, making it harder for any single positive development to shift the overall mood. This "scarring effect" could mean that even as fundamentals improve, household spending and investment may remain subdued for an extended period.
For investors, the persistent pessimism carries implications for sectors tied to discretionary spending, such as retail, travel, and housing. If consumer caution becomes entrenched, companies may face weaker demand growth, potentially weighing on earnings. Conversely, defensive sectors like healthcare and utilities could see relative stability.
Monetary policymakers may also face a dilemma: if consumers ignore falling inflation and strong job data, traditional interest rate adjustments might have limited impact on sentiment. Additional fiscal measures or targeted relief programs might be needed to rebuild trust, though such policies carry their own economic risks.
Ultimately, the question of "when will it get better?" remains open. Economists suggest that only a sustained period without new shocks—combined with consistent improvement in real wages and housing affordability—could gradually restore consumer confidence. Until then, the current mood may persist as a defining feature of the post-pandemic economic landscape.
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