A recent report by Goldman Sachs suggests that low consumer sentiment in the United States may be linked to a broader decline in public happiness and trust in institutions, not solely to economic factors. The analysis, authored by economist Joseph Briggs, examines the gap between consumer sentiment surveys, which have reached historic lows, and other economic indicators that show more positive performance.
The University of Michigan’s consumer sentiment index, a key metric cited in the report, recorded significant declines this year. According to the university’s data, the index fell 13% year over year in September, following an almost 8% drop from August.
In a note to clients, Briggs proposed that these low sentiment readings could be influenced by factors outside of traditional economics. “Low reported economic sentiment likely reflects a more fundamental, downbeat assessment of the state of the world rather than the economy,” Briggs wrote.
While acknowledging that inflationary pressures affect public confidence, the report argues that “lower happiness” helps explain the persistent disconnect between sentiment and measures such as gross domestic product growth.
To support this view, the Goldman Sachs report referenced data from the University of Chicago’s General Social Survey. The survey showed the share of respondents reporting they were “very happy” decreased from 31% in 2016 to 23% in 2024. During the same period, the percentage of respondents who said they were “not too happy” rose from 13% to 20%. Briggs’ analysis of the survey data indicated that the decline in overall happiness was more pronounced than the change in respondents’ perception of their financial satisfaction.
This perspective is shared by other observers. Joanne Hsu, director of the University of Michigan’s consumer sentiment survey, told CNBC earlier this year that the trend in low sentiment mirrors data showing decreasing happiness and declining trust in public institutions.
Briggs’ report also drew a direct connection between institutional trust and public happiness. His analysis found that lower trust in institutions accounted for a “disproportionate amount” of the decline in net happiness in recent years.
The report concludes that if consumer sentiment is increasingly tied to these non-economic variables, it may become a less reliable indicator for forecasting economic trends, even if the economy continues to perform well by other metrics.
