A persistent pessimistic sentiment regarding consumer spending has led market economists to question whether household financial conditions will see any real improvement. The University of Michigan Consumer Sentiment Index has once again hit a record low, indicating that public confidence in the economy has failed to recover after the pandemic. Years of high prices coupled with continuous external shocks have kept residents feeling inflation high and confidence persistently low. However, unusually, weakening confidence has not dampened consumer spending; US stocks have simultaneously reached new highs, the job market has remained resilient, and US consumption is exhibiting a divergent pattern of low confidence and robust spending.

The public has been trapped in a pessimistic economic climate for a long time, and their confidence in the economy is difficult to restore.

American consumer pessimism has persisted for quite some time, leading economists to widely question when residents' financial well-being will improve, and even whether there is any room for further recovery. The preliminary University of Michigan consumer sentiment index, released last week, fell to a record low in May. Multiple private consumer surveys also confirm that since the outbreak of the COVID-19 pandemic six years ago, American public confidence in the overall economy has failed to return to normal.



Yelena Shulyatyeva, senior economist at The Conference Board, stated that a series of economic shocks have left the public with no room to breathe or adjust. The overlapping effects of the pandemic, geopolitical conflicts, and tariff policies continue to erode public expectations and patience regarding the economy.

Cumulative high prices and perceived inflation far exceed data performance.

Market institutions typically measure inflation by annual increases, and current data is far from the 40-year highs seen during the pandemic. However, ordinary people place more emphasis on the cumulative price increases over many years. Cleveland Federal Reserve President Beth Hammack stated that in just a few years, the actual price increases experienced by the public are equivalent to the inflation levels of the previous decade.

Economic commentator Kyla Scanlon analyzed that even with a slowdown in inflation, prices of everyday consumer goods remain high, and the pressure on residents' cost of living has not eased at all. Research by PNC Financial Services Group indicates that high prices are the core cause of the decline in consumer confidence from 2019 to 2026, and have also caused a significant divergence between economic models and public sentiment. Public attention to inflation is at an unprecedented high, with related online searches reaching record highs.

Multiple shocks came one after another, leaving little window for emotional recovery.

A key reason for the difficulty in restoring confidence is the series of economic disruptions. Before the public could recover from one shock, new risks emerged one after another. Eric Winograd, chief economist at AllianceBernstein, stated that such a dense and continuous stream of unexpected events is extremely rare, and the ongoing shocks are constantly suppressing market confidence.

Georgetown University finance professor Francesco D'Acunto believes that a recovery in confidence requires several consecutive quarters of stable economic growth, while geopolitical instability and escalating trade tariffs have kept the market in a state of negative expectations. Joanne Hsu, head of the University of Michigan's consumer survey, frankly stated that after the pandemic, not only economic confidence, but also public well-being and trust in public institutions have weakened simultaneously.

Confidence and consumption have decoupled, leading to independent market trends.

It's worth noting that public pessimism hasn't translated into a contraction in consumption; the latest business data shows that household spending remains robust. Gregory Daco, chief economist at EY-Brexit, stated that the traditional link between consumer confidence and spending has become ineffective, and old analytical logic can no longer be applied in this special environment.

The performance of US stocks contrasts sharply with the depressed confidence. On the same day that the Michigan Consumer Sentiment Index hit a record low, the S&P 500 index simultaneously reached a new high. While stock indices have risen sharply in recent years, consumer confidence has nearly halved. Analysts suggest that investment decisions should focus on changes in confidence trends, rather than simply comparing levels to pre-pandemic levels.

Oil prices push up the cost of living, but consumer spending remains resilient.

Influenced by the situation in the Middle East, international oil prices have remained firmly above $100 per barrel, and US gasoline retail prices have broken through a key psychological barrier, directly changing residents' consumption habits. Home appliance and catering companies have both warned of operational pressures from weakening costs and confidence. The job market is showing a mild pattern of low hiring and low layoffs, providing a basic support for the economy.

Industry economists generally believe that despite the pessimistic public sentiment and the continued existence of external risks, consumption, as a core pillar of the US economy, is extremely resilient and unlikely to collapse significantly in the short term.

Summarize

Overall, the cumulative effect of high prices and continuous external shocks have jointly suppressed US consumer confidence, making it difficult to recover from the prolonged economic downturn. However, confidence and consumption trends are completely decoupled, with household spending remaining strong, US stocks bucking the trend and employment remaining resilient, forming a distinct divergence. Amid continued geopolitical tensions and high oil prices, short-term confidence is unlikely to improve significantly, but the fundamental resilience of US consumption will continue to support the overall economy.