Despite a booming economy, with unemployment near a 50-year low and wages rising, Americans are expressing unusually low levels of confidence in the near-term economic future. Consumer sentiment in the United States has been weaker than expected this summer, and a recent poll conducted by the Associated Press-NORC Center for Public Affairs Research found that more than half of adults think that the U.S. economy will get worse in the next year.
This is reflected in the fact that Americans are not spending like they usually do during this stage of an economic cycle. Normally, when the economy is performing well, people are more likely to spend, borrow, and invest. This time around, however, Americans are reticent to do any of the above. Although consumer spending is still edging higher, household debt has stayed relatively steady and business investment has declined over the past year.
This reluctance to spend or invest despite favorable economic conditions could be partly due to uncertainty brought about by President Donald Trump’s unconventional economic policies, including tax cuts, tariffs, and constantly shifting trade agreements. Americans may be holding back due to fears that these policies could bring unintended consequences to the economy.
It could also be the result of recent political turmoil. Recent unrest has raised fears that the economy could be entering a period of volatility and that the predictable climate of the last few decades could be disrupted. Americans may be holding back due to fears that business could be significantly impacted by the possible consequences of the current political crisis.
Finally, it could be that Americans simply feel like their economic reality does not match the rosy picture being painted by politicians and the media. Many Americans have yet to see the benefits of a booming economy in their own lives and that may be creating a sense of disbelief.
Whatever the cause, the fact that Americans are not spending like the economy is strong is a worrying sign. If Americans don’t start voting with their wallets soon, the broader economy may be in for an unexpected slowdown.