How Vibes Became a Nearly Undefeated Economic Indicator
Every month, thousands of randomly selected Americans get a letter in the mail from the University of Michigan asking how they’re feeling. This year their answers have been pretty unambiguous: bad.
They’ve been feeling bad about prices, bad about business conditions. Bad about their incomes and job security, the housing and stock markets. They’ve felt so bad, in fact, that Michigan’s Index of Consumer Sentiment was stuck at one of its worst readings on record for two months this spring after plunging 29% in the first four months of 2025. Over the 79 years of the survey, a drop this large this fast has almost always predicted a recession. Sentiment readings improved slightly at the start of June but still indicate Americans expect much higher prices and a much slower economy in the coming year.
“When all the signals are pointing the same way, I think we need to take the consumer seriously,” says Joanne Hsu, the director of the University of Michigan’s Surveys of Consumers. “It’s just really dangerous to overlook.”
Except that’s exactly what Wall Street has been doing. Even as so-called soft indicators such as sentiment surveys scrape along near record lows, with consumers expecting brutal inflation ahead, hard economic data like jobs are mostly holding up. Stocks have roared back from April lows, prompting respected financial commentators to dismiss pessimistic survey respondents as blinded by political ideology. As one Financial Times columnist put it in early May: “We should not believe consumers who say they’ve got the blues.”
More at:
https://archive.ph/QaAa8