Don’t dig the vibes

Weekly Updates

The vibe for consumers is terrible. Across the major industrialized economies, consumer sentiment has trended lower. Neither main US consumer sentiment indicator has recovered its pre-pandemic level. German consumer sentiment is languishing well below 2019 levels, near record lows on some measures. UK consumer sentiment is in the same position.
This widespread despondency suggests consumers are collapsing under the burden of tariffs and higher oil prices. Real world data tells a different story. US consumers absorbed tariffs through lowering their savings rates and are increasing spending. German retail sales are higher than pre-pandemic levels—and the latest data has not yet been revised higher (which nearly always happens). UK consumer spending is above pre-pandemic levels, while sentiment is far below.
This divergence is not just in headline data. Details such as consumer durable goods spending show that, despite sounding pessimistic, consumers continue to spend.
In the world of social media, with the combination of fake news and sensationalism, doom-scrolling through the news feed on a phone is commonplace. That informs the sentiment numbers that business media report with hushed reverence. However, it seems increasingly obvious that consumers have also recalibrated. When it comes to economic actions, people are able to distinguish what they see on their phones from reality.