Goldman Sachs: The surprising reason for the drop in US consumer confidence

The University of Michigan consumer sentiment index fell 13% in September compared to last year, to 47.8 points. Goldman Sachs economist Joseph Briggs argues that the decline is due not only to inflation, but to a general drop in happiness and trust in public institutions, which has not yet recovered from the COVID-19 pandemic.

The University of Michigan consumer sentiment index recorded a second reading in September at a historic low of 47.8 points, after a 13% drop compared to last year and a 7.5% drop compared to August. Goldman Sachs economist Joseph Briggs argues that the decline is not explained solely by inflation, but reflects a more pessimistic assessment of the state of the world and a lower level of happiness. Briggs points to data from the University of Chicago's General Social Survey, which shows that the share of 'very happy' people fell from 31% in 2016 to 23% in 2024, while the share of 'not so happy' people rose from 13% to 20%. Joanne Hsu, director of the Michigan survey, also linked the negative sentiment to a decline in trust in public institutions. Briggs' analysis attempts to explain the disconnect between consumer sentiment and objective economic performance indicators such as GDP growth and the stock market.