Consumer sentiment is lower than at the 9.1% inflation peak — top 10% do half of consumer spending

At first glance, this might seem surprising. With the exception of inflation, many economic measures remain strong, including gross domestic product growth. But consumer sentiment continues to languish.

This has prompted a debate over whether mere “vibes” are in play, or whether these long-used metrics are no longer capturing something fundamental to Americans’ economic well-being.

This debate matters politically because voters are placing an overwhelming priority on the economy as an issue in the midterms. A Pew Research survey in early October 2026 found that 84% of registered voters said the economy was very important to their vote, and the concern is bipartisan. Among the issues in that Pew survey, for example, “the economy” was the least polarizing, with 82% of Republicans and 88% of Democrats ranking it as very important.

Meanwhile, the overall drop in voters’ economic outlook has largely been driven by growing pessimism among Republicans. While Democrats remain much gloomier about the economy than Republicans, the gap is narrowing.

These trends help explain why Democrats are expected to make significant gains in Congress: This election will likely be seen as an indictment of how well the economy is working for ordinary Americans under President Donald Trump and the Republican-controlled Congress, despite strong macroeconomic measures.

So what is going on?

As a scholar of financial markets and global inequality, I believe the relationship between how people see their own finances and their view of the broader economy is also changing on a more fundamental level. And this shift will affect how they judge the next class of lawmakers in power.

Reality versus ‘vibes’

When scholars try to understand how people judge the economy – and how they separate their own personal circumstances from the broader economy – one of their key reference points is the University of Michigan’s consumer sentiment index. It asks respondents about their personal finances, their short-term and long-term economic outlook, and whether they think it’s a good time to make major purchases.

This gauge has historically tracked key economic measures of consumer spending and inflation: The state of the broader economy usually shapes the way people think about their own financial well-being.

But in recent years, these have diverged. By many measures, the economy is doing well, but people feel they’re falling behind. And this has only become more pronounced ahead of the midterms.

Despite strong consumer spending, robust business investment and low unemployment, consumer sentiment keeps slipping and is now 10% below where it was a year ago, according to the Michigan index.

Some commentators point to ongoing inflation as the reason for gloom. It has remained stubbornly above the Federal Reserve’s annual 2% target rate due to drivers like tariffs, energy price hikes stemming from Middle East turmoil, and massive amounts of investment in the artificial intelligence build-out.

But what’s really happening is that consumer sentiment data and inflation data have become untethered. Inflation has actually dropped sharply from its 21st-century peak of 9.1% in June 2022 after the pandemic to 3.7% in September 2026, but consumer sentiment is lower now than it was even then.

What about wages? Here, too, the data also doesn’t fully explain this disconnect. While inflation makes consumer goods pricier, it also lifts pay. Inflation-adjusted wages actually increased between 2022 and the first half of 2026, all while consumer sentiment remained weak. What has changed in recent months is that inflation-adjusted wages are now falling – which could help explain the darkening outlook among voters.

Inequality versus growth

One possibility is that deeply entrenched inequality explains this divergence.

Compared with other eras of moderate-to-high inflation, the U.S. economy today is much more unequal. Income inequality has increased over the past 20 years, narrowing only during the 2008 and 2020 crises before quickly widening to prior levels.

This trend is important for understanding which consumers are shelling out cash. The Fed has consistently cited strong consumer spending in its economic assessments, but the richest 10% of Americans account for half of that spending today. Meanwhile, spending by the bottom 80% of earners has fallen behind inflation.

In other words, the strong total consumer spending figures reported as official data are being driven by very wealthy Americans and fail to reflect the experience of typical consumers who are the bulk of the electorate.

This trend of increasing inequality has been particularly acute in terms of wealth: The top 0.1% of American households together own five times as much wealth as the bottom 50%. Much of this reflects the uneven gains of the stock market boom and how wealth is taxed.

In short, Americans’ economic malaise might be driven by concerns over income and wealth that conventional measures don’t fully capture.

It’s not just about me

When it comes to consumer surveys like the University of Michigan index, economists generally assume that the answers reflect the personal experience of respondents.

But I agree with other scholars who argue that sometimes these answers may be based less on people’s own circumstances and more on how they view the economy as a whole. This assessment could reflect, for example, concerns like equity, equality of opportunity and economic justice.

When responses are driven by a concern for collective well-being rather than just personal material self-interest, social scientists refer to such perceptions as “sociotropic.”

This last point isn’t just theoretical. Research suggests voters tend to weight their perceptions of the economy more heavily than their personal financial circumstances when deciding whether to vote for the incumbent party.

Trade is one good example. Americans’ preferences for trade policy are driven less by how a particular measure, like tariffs, would impact them personally and more by how they think it would affect the country as a whole.

If consumer sentiment follows a similar path, that could explain the divergence between generally strong economic trends and weak consumer sentiment. People are thinking not just about their own conditions but those of the U.S. as a whole, and it’s possible that their understanding of “the economy” includes its relationship to inequality.

Understanding the disconnect between the economic data traditionally used to assess the economy’s health and Americans’ perceptions of that economy is important not just to the scholars trying to make sense of it – it could also help set an agenda for the incoming Congress. If economic insecurity punishes the governing party at the polls, the next Congress will be expected to do something about it once sworn in.

Voters generally back the incumbent party when the economy is doing well and the out-party when it’s not. But how they judge the health of the economy is not straightforward, and the past six years suggest that improving headline measures of economic health – without regard to Americans’ lived experience and their concerns about what kind of economy is being built – may not be enough to assuage voters’ concerns.

Erin Kay Lockwood, Assistant Professor of Political Science, University of California, Irvine

This article is republished from The Conversation under a Creative Commons license. Read the original article.