Has consumer confidence hit rock bottom?

Written by: Zhou Ziheng

University of Michigan Consumer Confidence Index Hits 74-Year Low

— Analysis and Outlook on the Current U.S. Economy —

1. Latest Reading of the Consumer Confidence Index and Interpretation of the Historic Low

In April 2026, the preliminary University of Michigan Consumer Confidence Index stood at 47.6, marking the lowest level in the 74-year history of the survey. Since its inception in 1946, this index measures consumers’ current assessments and future expectations regarding personal finances, the overall business environment, and durable goods purchasing conditions. Over the past year, the index has remained at low levels for an extended period, reaching a trough during the “Liberation Day Tariffs” event last April. Although there was a slight rebound afterward, it failed to sustain.

Compared to previous crises, this low point is particularly notable: it falls below levels seen during the 2008 financial crisis and is weaker than during the early COVID-19 pandemic, more closely resembling the readings during the 1980s recession, yet without accompanying significant financial system collapses or widespread bank failures. This phenomenon reflects profound changes in economic relationships in the post-pandemic era. Traditional leading indicators such as yield curve inversions or the Sam rule have lost their predictive power. Consumer sentiment is no longer solely driven by macroeconomic data but is also influenced by deteriorating mental health, declining institutional trust, and social polarization. The low index is not a short-term fluctuation but a concentrated manifestation of long-term structural pressures.

2. Main Causes of the Low: Persistent High Prices and New Geopolitical Shocks

Consumers repeatedly emphasize that high prices have been the most significant negative factor over the past few years. Even though inflation has retreated from its peak in 2022 and stabilized above the Federal Reserve’s target, price levels still strain household budgets. The Iran conflict that erupted in March 2026 further intensified these concerns. Consumers believe that geopolitical turmoil will push energy prices higher and transmit through supply chains to a broader range of consumer goods, leading to a significant rise in short-term inflation expectations.

Following the conflict, gasoline price expectations surged to several times their previous levels, directly worsening personal financial assessments. Consumers do not equate gasoline prices with overall inflation, but as a visible daily cost, they have become a key trigger for declining confidence. Meanwhile, labor market dynamics have weakened, and income growth remains sluggish, causing households to face dual pressures on expenses and income, forming the core pain point of the “kitchen table” discussion.

3. Stock Market New Highs and Consumer Confidence Divergence

Despite record-low consumer confidence, the S&P 500 index approaches historic highs. This divergence stems from differing expectations between market participants and ordinary consumers. Analysts and investment institutions mainly drive stock prices based on improved corporate earnings prospects—either through cost reductions or demand recovery. Conversely, consumers, as demand agents, perceive the economy as weak more directly, especially among lower wealth groups.

Survey data shows that high-wealth consumers with large stock portfolios have quickly recovered confidence from previous lows and are more adaptable to shocks like the “Liberation Day Tariffs.” In contrast, lower-wealth groups continue to drag down the overall index, as they hardly benefit from rising asset prices. Consumers are also cautious about productivity gains from artificial intelligence, feeling more the economic weakness than future dividends. This divergence indicates that stock market optimism mainly serves capital interests and does not broadly reflect actual consumption capacity.

4. Stability of Survey Methods and Changing Era Background

Since 1946, the core focus of the University of Michigan Consumer Confidence Index—personal finances, business conditions, and willingness to buy durable goods—has remained unchanged, ensuring long-term comparability. The survey methodology has evolved with technological advances: from face-to-face interviews to fixed-line phones, mobile phones, and now online surveys, adapting to communication habits. These methodological updates are not the cause of the current low readings but are necessary to ensure data representativeness.

In the post-pandemic period, traditional economic relationships have fractured, compounded by worsening mental health among young people, declining institutional trust, and political polarization, leading to a more negative overall perception of the economy. Even without a financial crisis, these structural changes are sufficient to depress the index. A notable trough occurred in June 2022, coinciding with the peak of post-pandemic inflation; now, although inflation has eased, the labor market is significantly weaker than in 2022, and consumers face dual pressures of prices and income, making the decline in confidence logical.

5. Forward-Looking Significance of the Confidence Index for Future Consumption Spending

The consumer confidence index is a key leading indicator for predicting consumer spending. The latest data release signals multiple warnings: declining labor market vitality, rising credit card delinquencies, increased borrowing, and low household savings rates. These factors collectively point to weakening consumption resilience. Although consumption remained high during the low confidence period in 2022, supported by strong income and asset levels, the current labor market can no longer provide similar buffers.

Recent signs of slowing consumption are evident. High-wealth groups can maintain demand through asset appreciation, but middle- and low-income groups struggle to keep pace. Wealth effects do exist—research shows that large investment portfolios or property appreciation can boost risk-taking and promote additional spending—but their impact is disproportionate, mainly benefiting the wealthy. Overall, consumers are in a fragile balance, unable to rely on the post-pandemic “resilient consumption” model to sustain economic growth.

6. Divergence in Inflation Expectations and Purchasing Decisions

One-year-ahead inflation expectations show a downward trend, yet the proportion of consumers citing high prices as their main personal financial burden continues to rise. This divergence began after the inflation peak in 2022: despite actual inflation retreating, painful memories of high prices persist. After the Iran conflict, short-term inflation expectations rose again, but long-term (over five years) expectations increased only slightly, indicating consumers see the shocks as temporary.

In purchasing decisions, there has been no large-scale “front-loading” of durable goods (like cars or homes) to avoid future price hikes. The “buy now to avoid rising prices” sentiment for such items has only modestly increased. This reflects income confidence issues: even with expectations of short-term price pressures, households are reluctant to undertake large expenditures when budgets are tight. While this behavior can temporarily suppress inflation, it also limits potential demand-driven growth.

7. Rapid Transmission of Iran Conflict to Consumer Psychology

The Iran conflict began at the end of February, and by March 1, survey data already showed significant changes, demonstrating the extremely rapid transmission of geopolitical shocks to household psychology. Gasoline price expectations jumped first, driving overall short-term inflation expectations and a decline in confidence indices. Consumers clearly distinguish gasoline from general prices but still view it as a significant personal financial pressure.

This immediate reaction highlights the role of modern information environments: rapid dissemination of conflict news causes consumers to quickly adjust expectations. Compared to traditional crises, the current transmission speed is faster and more widespread, aligning closely with the IMF’s global economic outlook scenario—predicting energy prices will rise, pushing up inflation and dragging down global growth to 2%. U.S. consumer expectations also point toward short-term economic slowdown.

8. Social Media Algorithms and the “Expectation Deterioration” Era

Long-term low consumer confidence is also influenced by how information is accessed. Algorithm-driven news feeds tend to amplify emotional and negative content, creating a self-reinforcing cycle. Unlike the mid-20th century, when information sources were limited, today’s 24/7 online environment makes negative economic news more dominant in shaping perceptions. Even as traditional media’s reach diminishes, social platforms intensify polarization and negative expectations through sensational content.

This phenomenon is not solely caused by “bad news” but interacts with the reality of high price pressures, forming an “expectation deterioration” era. Caution is advised in historical comparisons: current consumer demographics and generational characteristics differ from the past. While the absolute level of confidence is low, it does not necessarily mean an irreversible downward trend, but substantial positive developments are needed to reverse it.

9. Actual Conditions of Consumer Finances, Credit, and the Labor Market

Credit data show that while credit card delinquencies fluctuate, interpretation must consider lender behavior. The Federal Reserve of Philadelphia notes that apparent improvements often stem from high-income groups; middle- and low-income households are increasingly excluded from credit access, and their data are underrepresented. National figures mask this stratification.

In the labor market, over two-thirds of consumers expect unemployment to rise in the next year—far above early 2025 levels. Perceived unemployment risk for individuals or family members remains high. Last year, concerns shifted from tariffs to AI’s impact on employment, but the overall judgment remains: the labor market has significantly weakened compared to early 2025. Demographic data show confidence declines across age, income, and political groups, indicating that current deterioration transcends partisan divides and has become a broad consensus.

10. Future Economic Outlook and Key Monitoring Indicators

The recovery of consumer confidence depends on the duration of Iran conflict-related supply chain disruptions, especially the reopening of the Strait of Hormuz. If disruptions persist, energy prices will transmit to other consumer goods, creating a negative cycle: rising costs for businesses, limited purchasing power for consumers, and slowed economic growth. If short-term shocks subside quickly, consumers are likely to adjust rapidly and regain confidence.

Key indicators to monitor include the extent of gasoline price pass-through to overall prices, actual labor market data, and the sustainability of high-wealth consumer spending. Federal Reserve policies, fiscal support, and geopolitical developments will be critical variables. In an environment of high uncertainty, consumers tend to adopt conservative strategies, and the pace of economic recovery may lag behind market optimism.

Overall, the record low of 47.6 warns of potential economic fragility. Although the stock market reflects corporate optimism, consumer weakness may constrain aggregate demand. Future efforts should balance growth, control inflation, and stabilize employment to gradually rebuild confidence and achieve sustainable recovery.