Goldman Sachs has highlighted a drop in overall happiness as a key factor behind the persistently weak consumer sentiment in the U.S., despite a relatively stable economy. The University of Michigan's consumer sentiment index hit record lows this year, declining by 13% year over year in September, with an 8% drop from August alone. Economist Joseph Briggs from Goldman Sachs noted that this decline likely reflects a broader societal pessimism rather than purely economic conditions.

Inflation remains a factor weighing on consumer confidence, but Briggs emphasized that the disconnect between consumer sentiment and positive economic indicators like GDP growth and stock market performance can be partially explained by declining happiness levels. Data from the University of Chicago's General Social Survey shows that the percentage of people reporting being "very happy" has dropped from 31% in 2016 to 23% in 2024, while those who say they are "not too happy" increased from 13% to 20%. This overall decline in happiness appears to be more pronounced than changes in financial satisfaction.

Other experts, including Michigan's survey director Joanne Hsu, have observed a similar trend, linking the decline in consumer sentiment to decreasing trust in public institutions alongside falling happiness. Briggs' analysis underscored that this erosion of trust has contributed significantly to the drop in overall happiness, further influencing consumer outlook. This suggests that broader social factors, rather than economic metrics alone, are driving negative sentiment.

Given these findings, consumer sentiment surveys may become less reliable as economic predictors going forward. Briggs warned that sentiment might not rebound even if economic growth continues, as the low confidence stems from deeper non-economic issues. This evolving landscape calls for a more nuanced approach to interpreting consumer sentiment in the context of societal wellbeing and institutional trust.