Key Takeaways

  • Recent consumer sentiment surveys have shown rising optimism, while economic data show a weakening labor market and growing inflation.
  • This week’s consumer sentiment report is expected to confirm this trend, even as some economists think a weakening job market could undermine the good vibes.
  • One study suggested that consumers may become more resilient to economic uncertainty.

The economy could be weakening, but consumers are feeling alright.

Recent surveys have shown that consumers and businesses have an improving view of the economy, even as economic data is becoming more dour. This is the reverse of earlier this year, when consumer surveys (sometimes called “soft data”) revealed a sour view on the economy, even amid “hard” data releases that showed ongoing economic resilience.

Economists are watching for Friday’s sentiment report for August to see if the optimism continues, even as the labor market has weakened and inflation has remained elevated.

“The soft and hard data have moved in somewhat opposite directions lately, but we think the surveys will cast a dimmer light going forward as economic growth softens,” wrote Oren Klachkin, financial market economist at Nationwide.

Economists See Sentiment Improving as Tariffs Worries Subside

Economists on average believe that the Michigan Consumer Sentiment Index will continue to rise when it’s released on Friday, according to a survey by The Wall Street Journal and Dow Jones Newswires.

After President Donald Trump announced a series of tariffs earlier this year, the public reacted negatively, anticipating price increases and raising worries over the health of the economy. Now, as the most recent Consumer Price Index (CPI) showed some impact on prices, consumer perceptions about the economy are rising.

Recent consumer sentiment surveys have shown that worries about inflation are fading even as Trump continues to threaten more tariffs. For example, a July survey of small business owners found significant improvement in economic expectations, while inflation worries subsided.

Consumers Developing Resiliency Amid Economic Uncertainty

One possible reason that “hard” and “soft” data aren’t moving in line is that consumers are developing more resiliency to economic uncertainty. 

“Consumers have developed stress tolerance, the ability to function normally while carrying constant anxiety,” said Katie Thomas, lead author of the Kearney Consumer Institute’s Consumer Stress Index.

Management consultancy Kearney reported that anxiety levels for U.S. consumers fell in the second quarter, partly because they are making more targeted decisions with their spending amid economic anxiety, Thomas said.  

“We’re living in an atmosphere of pervasive, ambient consumer anxiety. Housing stress, inflation fatigue, and optimistic jobs data all exist at once. These mindsets explain the resulting behavioral swings, often within the same week,” Thomas said.