Consumer sentiment in the U.S. has reached record lows this year, even as key economic indicators suggest a stable and growing economy. The University of Michigan’s consumer sentiment index dropped 13% year over year in September, with an 8% decline from just the previous month. This persistent pessimism despite solid GDP growth and a strong stock market has puzzled economists and policymakers trying to understand underlying consumer confidence.

Goldman Sachs economists point to a broader societal decline in happiness as a root cause for the weak consumer sentiment readings. Joseph Briggs, a Goldman economist, noted that reduced feelings of happiness and rising pessimism about the state of the world have contributed significantly to low economic sentiment. While inflation and affordability issues remain relevant, Briggs emphasized that the disconnect between economic fundamentals and sentiment largely stems from a more fundamental decline in overall well-being and optimism.

Supporting this view, data from the University of Chicago's General Social Survey shows that the share of Americans reporting they feel “very happy” fell from 31% in 2016 to 23% in 2024. At the same time, those indicating they are “not too happy” increased from 13% to 20%. This downward trend in happiness has been sharper than changes in financial satisfaction, suggesting that emotional and social factors are weighing heavily on consumer outlooks.

Additionally, the decline in happiness correlates closely with eroding trust in public institutions, revealing a connection between societal trust and individual well-being. Joanne Hsu, director of the University of Michigan’s sentiment survey, and Briggs both highlight this link, indicating that worsening trust has disproportionately driven recent drops in happiness and confidence. Given these dynamics, Goldman Sachs warns that consumer sentiment metrics may become less reliable for predicting economic conditions if these broader social challenges persist.