Why Consumers Say the Economy Is Weak — But Their Wallets Disagree

Americans’ views of the economy and their spending tell two different stories. Surveys show consumer confidence weakened in 2025 as tariffs, higher inflation and slower job creation cloud the outlook. Yet retail sales, service spending and other measures of consumer outlays have remained surprisingly robust, suggesting household behavior does not fully mirror their pessimistic assessments.

Several factors help explain the disconnect. First, many households reacted to earlier months of inflation by adjusting budgets and shifting purchases toward necessities and services rather than durable goods, keeping headline spending steady even as sentiment cooled. Second, consumers still hold elevated savings from pandemic-era stimulus and accumulated income gains, giving them a buffer that can support spending despite worries about prices or jobs. Third, labor-market strength is uneven: while fewer new jobs were added in 2025 than in prior years, unemployment remained low in many regions and wage growth persisted in certain sectors, sustaining income for large swaths of the population.

Tariffs have added another layer of uncertainty. Trade-related costs can raise prices for imported goods, squeeze corporate margins and alter investment plans — influences that weigh on consumer expectations even if their day-to-day spending patterns change slowly. Economists also point out that surveys capture perceptions and future expectations, whereas spending data reflect realized behavior and access to credit or savings.

Looking ahead, several developments could reconcile the gap between sentiment and spending. If inflation moderates and tariff policies stabilize, consumers may regain confidence and broaden their spending beyond essentials. Conversely, if job creation slows further or price pressures persist in key categories like housing and food, spending could weaken and align more closely with pessimistic sentiment.

For businesses and policymakers, the divergence is consequential. Firms monitoring demand must distinguish between a temporary resilience driven by savings and a more durable rebound in underlying consumer confidence. Policymakers need to assess whether supportive labor-market indicators are widespread or concentrated, and whether targeted measures are warranted to shore up income and address cost pressures.

In short, the economy in 2025 presents a paradox: sentiment is subdued, but spending keeps moving. How that paradox resolves next year will depend on inflation trends, trade policy decisions and the health of labor markets.