Majority of Americans Believe Affordability Crisis Persists Amid Declining Consumer Sentiment
- 95% of Americans perceive an affordability crisis, struggling with basic expenses like gas and groceries.
- The University of Michigan’s consumer sentiment index hit record lows, dropping 13% year over year in September.
- Goldman Sachs cites declining happiness and trust in institutions as potential factors influencing depressed consumer sentiment.
A recent poll conducted by The Guardian revealed that an overwhelming 95 percent of Americans believe the United States is facing an affordability crisis, with many individuals reporting difficulties in managing essential expenses such as gas and groceries.
Goldman Sachs has identified a significant factor affecting consumer sentiment: a decrease in overall happiness. The consumer sentiment index, tracked by the University of Michigan, reached record lows this year, showcasing a 13% decline year over year in September, driven by a near 8% drop from August.
Despite the economy appearing stable, economists have been perplexed by the prolonged low sentiment since the COVID-19 pandemic. Goldman economist Joseph Briggs informed clients that this negative outlook may be influenced by overarching societal pessimism. He stated, “Low reported economic sentiment likely reflects a more fundamental, downbeat assessment of the state of the world rather than the economy.”
Briggs noted that inflationary pressures are also likely affecting consumer confidence. However, he suggested that the general decline in happiness helps explain the disparity between consumer sentiment and other economic indicators, such as gross domestic product growth and stock market performance, which present a more optimistic picture.
Data from the University of Chicago’s General Social Survey shows that happiness levels have not rebounded since the pandemic. The proportion of respondents who described themselves as “very happy” decreased from 31% in 2016 to 23% in 2024, while those indicating they were “not too happy” rose from 13% to 20% in the same period. This survey data indicates that overall happiness declined more sharply than perceptions of financial satisfaction.
Joanne Hsu, director of the Michigan survey, echoed Briggs’ findings, linking the downward trend in consumer sentiment to decreasing levels of happiness and trust in public institutions. Additionally, Briggs identified a correlation between waning trust in institutions and diminishing happiness, suggesting that the loss of confidence in these bodies has disproportionately contributed to the decline in net happiness in recent years.
Given the relationship between sentiment and non-economic factors, Briggs cautioned that consumer sentiment metrics may not improve, even if the economy continues to grow. This raises concerns about the future efficacy of consumer sentiment as a predictor of economic trends.
News Courtesy of CNBC
