Global Economics Comment Is Poor Economic Sentiment Really About the Economy

Economics Research 17 September 2026 | 9:35PM EDT

Global Economics Comment: Is Poor Economic Sentiment Really About the Economy?

n Consumer sentiment remains very weak despite solid economic fundamentals, Joseph Briggs | including a healthy labor market, a booming stock market, and solid consumer Goldman Sachs & Co. LLC spending and GDP growth. This divergence is visible globally, but especially in Sarah Dong the US. | Goldman Sachs & Co. LLC

n There are several reasons for this divergence. Cross-country relationships confirm that high price levels are lowering sentiment, while amplified political biases have led to sharp shifts after recent global elections that brought change in political leadership. But the weakness in sentiment is also quite broad. Sentiment remains below 2019 levels for all groups in the US even after stratifying by wealth, income, generation, social media use, political party, and homeownership. n One explanation for these patterns is that people have generally become more downbeat on the state of the world for reasons unrelated to the economy. Consistent with this explanation, overall happiness levels deteriorated sharply in 2020 and have yet to recover, despite people’s assessment of their financial situation only deteriorating modestly. While there are several plausible explanations for this shift, lower happiness is more strongly correlated with lower confidence in societal and government institutions since the pandemic. n These results suggest that low reported economic sentiment likely reflects a more fundamental, downbeat assessment of the state of the world rather than the economy. Consumer sentiment may therefore not improve for the foreseeable future even if the economy continues to outperform and, as a result, will likely remain a less useful tool for predicting economic dynamics.

Is Poor Economic Sentiment Really About the Economy?

Consumer sentiment fell sharply in 2020 and remains depressed despite solid economic fundamentals, including a healthy labor market, a booming stock market, and solid consumer spending and GDP growth.

The left chart of Exhibit 1 shows that the average of the University of Michigan’s consumer sentiment and The Conference Board’s consumer confidence measures currently stands well below the level implied by the current US unemployment rate, headline inflation, and wealth-to-income ratio. And while the underperformance is particularly pronounced in the US, the right chart of Exhibit 1 shows that sentiment is currently below model-predicted levels in almost all DMs.

Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to

Goldman Sachs Global Economics Comment

Exhibit 1: Consumer Sentiment is Notably Lower than Implied by Economic Fundamentals Across Major Economies

Source: The Conference Board, University of Michigan, Haver Analytics, Goldman Sachs Global Investment Research

There are several well-established reasons for this divergence. Intuitively, after scatter-plotting the peak year-over-year headline inflation rate during the pandemic against its latest 3m average consumer sentiment score from Morning Consult, we find that the rise in price levels due to the post-pandemic inflation surge appears to be weighing on consumer sentiment across countries. Furthermore, political biases have led to sharp shifts after recent global elections that brought change in political leadership (these biases became amplified in the US after a switch to online data collection in the UMich sentiment survey).

Exhibit 2: Sentiment Remains Depressed in Countries That Experienced More Extreme Pandemic Inflation; Political Biases Are Visible Around Recent Global Elections that Brought Change in Political Leadership Index Change in Morning Consult Consumer Sentiment Index Around Elections (+/- 3 Months) That Led to points 60 Changes in Political Party Leadership 60 50 Election Winner 50 40 Incumbent Party

US 2024 UK 2024 Germany 2025 Poland 2023

Source: Morning Consult, Goldman Sachs Global Investment Research

To help document the drivers of low sentiment, in…