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Goldman Sachs has identified an unusually broad explanation for why consumers remain so gloomy even while key measures portray a solid economy. The bank says weak sentiment may reflect a decline in happiness that reaches beyond household finances and into a darker assessment of society itself.

The University of Michigan’s consumer sentiment index hit record lows this year, sharpening a puzzle that has lingered since the Covid pandemic. In September, the index dropped 13% from a year earlier after falling almost 8% from August alone.

Those readings have left economists asking why public confidence remains depressed while the economy has continued to hum along on paper. Goldman economist Joseph Briggs told clients this week that pressure on sentiment may be rooted in a broader strain of social pessimism.

“Low reported economic sentiment likely reflects a more fundamental, downbeat assessment of the state of the world rather than the economy,” Briggs wrote to clients. His argument places the sour mood in a wider context than conventional economic figures alone can capture.

Briggs did not dismiss the role of inflationary pressures, which he said are likely also damaging confidence. Yet he said “lower happiness” can partly explain the stubborn gap between the sentiment index and measures including gross domestic product growth or stock market performance, both of which have offered rosier views.

To support that case, Briggs pointed to the University of Chicago’s General Social Survey. Its findings show that happiness never fully bounced back after declining during the pandemic, even as the perception of financial satisfaction held up better than overall happiness in his analysis.

The share of respondents who described themselves as “very happy” fell from 31% in 2016 to 23% in 2024, according to the survey data. Over the same period, the share selecting “not too happy” climbed from 13% to 20%.

That split matters to Briggs’ assessment because the fall in general happiness was sharper than the decline in financial satisfaction tracked by the same survey. In his analysis, economic unease cannot be considered in isolation from the broader public mood.

Briggs is not alone in connecting consumer attitudes to declining happiness. Joanne Hsu, director of the University of Michigan survey, told CNBC earlier this year that the deterioration in sentiment mirrors readings showing both lower happiness and weakening trust in public institutions.

Trust also played a central role in Briggs’ analysis. He found that lower confidence in institutions accounted for a “disproportionate amount” of the decline in net happiness in recent years, connecting sour consumer readings with concerns that standard economic indicators do not directly measure.

The disconnect helps explain why stronger economic performance or rising markets may not automatically lift the public’s outlook. Consumer sentiment can remain weak even when gross domestic product growth and stock market performance present a more favorable picture, Briggs said.

That creates a complication for those using sentiment to anticipate economic dynamics. If the index increasingly reflects distrust and unhappiness outside the economy, its movements may say less about economic conditions than other measures do.

Briggs warned that sentiment may fail to recover even if the economy keeps chugging along. Improvement in conventional indicators would not necessarily resolve the broader pessimism identified in the social survey data or rebuild trust in public institutions.

As a result, he said consumer sentiment could become a less useful predictor of economic dynamics. The record lows, steep September declines and persistent unhappiness reveal a striking divide between what the economy shows on paper and how consumers say they feel.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.