Goldman Sachs has identified declining happiness and trust in institutions as key factors behind persistently weak U.S. consumer sentiment, despite otherwise solid economic indicators. According to Goldman economist Joseph Briggs, the University of Michigan's consumer sentiment index reached record lows this year, falling 13% year over year in September, including a nearly 8% drop from August alone [1]. Briggs noted that this negative sentiment is not fully explained by traditional economic measures such as GDP growth or stock market performance, which have shown more positive trends [1].
Briggs pointed to data from the University of Chicago's General Social Survey, which showed that the share of respondents feeling 'very happy' declined to 23% in 2024 from 31% in 2016, while those reporting being 'not too happy' increased from 13% to 20% over the same period [1]. He emphasized that overall happiness has declined more sharply than perceptions of financial satisfaction, suggesting that broader societal pessimism is at play [1].
The analysis also highlighted a strong link between lower happiness and decreasing trust in public institutions, with Briggs finding that reduced trust accounted for a 'disproportionate amount' of the decline in net happiness in recent years [1]. Joanne Hsu, director of the Michigan survey, echoed these findings, stating that the downtrend in sentiment mirrors decreases in both happiness and institutional trust [1].
Briggs cautioned that, given the influence of non-economic factors, consumer sentiment readings may not improve even if the economy remains strong. This could make consumer sentiment a less reliable predictor of future economic dynamics, according to his assessment [1].
CONCLUSION
Goldman Sachs and other economists suggest that declining happiness and trust in institutions are driving weak consumer sentiment, despite positive economic fundamentals. This disconnect may reduce the predictive value of sentiment indices for economic trends, signaling a shift in how market participants interpret these measures.