A shopper browses near a “SALE” sign in the meat section of a grocery store. According to a new Guardian poll, 95% of Americans say the country is in the midst of a price crisis, with many reporting that they are having trouble getting essentials like gas and groceries.
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Goldman Sachs identified a potential cause of the deterioration in consumer sentiment as a decline in happiness.
Consumer confidence, surveyed by the University of Michigan, hit an all-time low this year. After falling nearly 8% in August alone, the index fell 13% in September compared to the same month last year.
Economists have widely questioned why sentiment has remained depressed since the coronavirus pandemic, even though the economy is performing well on paper. Goldman economist Joseph Briggs told clients this week that the downward pressure could stem from widespread pessimism in society.
“The reported low economic sentiment likely reflects a more fundamental and pessimistic assessment of the global situation than the economy,” Briggs wrote to clients.
Indeed, Briggs said inflationary pressures were also likely to undermine confidence. But he said overall “declining happiness” could partially explain the continued disconnect between sentiment and other indicators of economic performance that provide an optimistic outlook, such as gross domestic product growth and stock market trends.
Briggs pointed to data from the University of Chicago’s General Social Survey showing that happiness levels have not fully recovered from the decline during the pandemic. According to the survey data, the percentage of respondents who feel “very happy” has fallen from 31% in 2016 to 23% in 2024. The data shows that the proportion of people who say they are not very happy has increased from 13% to 20% over the same period.
Briggs’ analysis of the data found that overall happiness declined more sharply than perceived financial satisfaction, which was also tracked in the survey.
Briggs is not the only economist to point out that happiness levels are declining. Joanne Hsu, Michigan’s research director, told CNBC earlier this year that the downward trend in sentiment reflects measurements showing declines in both happiness and trust in public institutions.
Briggs also noted the link between lower overall happiness and lower trust in institutions. He found that declining trust in these organizations has caused a “disproportionate” decline in net happiness in recent years.
Briggs said measures of consumer sentiment may not improve even if the economy continues to perform well, given its association with non-economic variables. As a result, consumer sentiment may become less useful as a predictor of economic trends, he said.
