Consumer sentiment is lower now than when inflation peaked at 9.1% — and the richest 10% of Americans account for half of consumer spending

As the U.S. midterm elections draw near, political analysts are grappling with a puzzling economic situation. Despite an economy that appears robust with strong GDP growth, consumer sentiment remains disheartened at its lowest point since inflation peaked at 9.1% in mid-2022. This stark divergence between economic indicators and public sentiment has sparked debate about whether "vibes" or fundamental economic well-being is truly at play.

The Pew Research poll from early October 2026 reveals that a whopping 84% of registered voters deem the economy a crucial factor in their voting decisions, a sentiment echoed equally by both Republicans and Democrats. However, Republicans are increasingly pessimistic about the economy's performance under President Donald Trump and the Republican-controlled Congress, signaling a potential political windfall for Democrats, who are expected to gain significant ground in Congress.

The University of Michigan's consumer sentiment index, a key reference point for economists, has consistently tracked consumer finances, economic outlook, and attitudes towards major purchases. Historically, this index has aligned closely with the broader economic landscape. Yet in recent months, the index has plummeted 10% below its level from just a year ago, despite the economy showing signs of strength, such as robust business investment, low unemployment, and solid consumer spending.

Economists are divided on the reasons behind this unsettling trend. Some attribute it to persisting inflation, which remains stubbornly above the Federal Reserve's 2% target, fueled by factors like tariffs, energy price hikes, and extensive artificial intelligence investments. However, inflation has since dropped significantly from its 21st-century peak of 9.1% to a more manageable 3.7% in September 2026.

The disconnect between inflation data and consumer sentiment is even more pronounced when considering wage growth. Although inflation-adjusted wages have increased between 2022 and the first half of 2026, consumer sentiment has not followed suit.

Rising inequality may also be a contributing factor. The U.S. economy is now more unequal than in previous eras of moderate-to-high inflation. While the top 10% of Americans account for half of consumer spending, spending by the bottom 80% has fallen behind inflation. The wealth gap is staggering, with the top 0.1% of households owning five times as much wealth as the bottom 50%. This wealth disparity, driven by stock market gains and tax structures, may be deeply affecting how Americans perceive their economic well-being.

Moreover, respondents to consumer surveys like the University of Michigan index may not always be reflecting personal financial experiences. Instead, their answers could be influenced by perceptions of collective well-being, equality of opportunity, and economic justice – what social scientists refer to as "sociotropic" views. This perspective shift could have significant political implications, as voters may place greater importance on how the economy impacts the broader population rather than just their personal financial circumstances.