A gallon of milk costs 26% more than it did in January 2020. Average rents in major metro areas have jumped by a similar margin. Gas prices, while off their 2022 highs, remain well above pre-pandemic levels. Americans don’t need a chart to know this. They see it every time they open their wallets.
That lived experience is now showing up in hard data. According to the Conference Board’s Consumer Confidence Survey, which polls about 3,000 U.S. households monthly, the share of respondents expecting their financial situation to deteriorate over the coming year has climbed to roughly 32%, a level of household pessimism not recorded since 2018. The finding arrives at an uncomfortable moment: official inflation measures show price growth well below its 2022 peak, yet cumulative cost increases continue to grind down paychecks and savings accounts nationwide.
Consumer spending accounts for about two-thirds of U.S. economic output. When nearly one in three households braces for harder times ahead, the consequences extend far beyond family budgets.
What the surveys actually show
The Conference Board’s expectations subindex, which measures how Americans view their income prospects, business conditions, and job availability over the next six months, posted only a modest rebound in early 2026 after falling sharply at the start of the year. As of spring 2026, the subindex remains near its lowest readings in several years.
The University of Michigan’s Survey of Consumers, an independent monthly gauge that has tracked household sentiment since the 1940s, tells a similar story. Its expectations component has hovered at depressed levels through the first half of 2026, with respondents consistently citing high prices and economic uncertainty as top concerns.
Price data from the Bureau of Labor Statistics reinforce the picture. The agency’s Consumer Price Index charts show that shelter, food, and energy costs have remained elevated through early 2026. Headline CPI inflation has retreated from the roughly 9% annual rate recorded in mid-2022, but the cumulative damage is severe: grocery prices are up more than 25% compared to early 2020, according to BLS food-at-home data, and average rents in many metro areas have climbed by a comparable margin.
That disconnect between “inflation is slowing” and “everything still costs a lot more” sits at the heart of the pessimism. For most families, the rate of change matters less than the price on the receipt.
Paychecks haven’t caught up
On paper, the labor market looks resilient. Unemployment has stayed relatively low, and job openings remain elevated in healthcare, logistics, and hospitality. But the composition of hiring matters. A disproportionate share of recent job gains has come in lower-wage service roles, and average weekly hours worked have flattened, limiting take-home pay growth even for people with steady employment.
Real wage growth, which adjusts pay increases for inflation, turned slightly positive in late 2024 after roughly two years of declines, according to BLS earnings data. That improvement has continued into 2025 and early 2026, but for households whose biggest expenses are housing and food, the categories where prices have been stickiest, modest nominal raises have not closed the gap. Lower-income families feel the squeeze most acutely because essentials consume a larger share of every dollar they earn.
The result is a paradox that frustrates economists and policymakers: the economy can post solid GDP growth and low unemployment while a significant share of the population genuinely struggles to keep up. Dana Peterson, chief economist at the Conference Board, has noted in public commentary that the divergence between top-line economic data and household-level experience is one of the defining features of this cycle.
Tariffs are compounding the pressure
Broad tariff actions rolled out by the Trump administration beginning in early 2025, including expanded duties on Chinese imports and new levies on steel, aluminum, and a range of consumer goods, have introduced a fresh source of price anxiety. Retailers and manufacturers have warned that higher input costs are already filtering into shelf prices for electronics, appliances, and building materials.
The Conference Board has flagged trade-policy uncertainty as one of the top concerns now cited by survey respondents, alongside inflation and housing affordability. Economists at Goldman Sachs and JPMorgan have raised their probability estimates for a U.S. recession in 2026, citing tariff-driven cost pressures and weakening consumer confidence as key risk factors.
For households already stretched thin, the prospect of another round of price increases, this time driven by policy choices rather than pandemic-era supply-chain disruptions, reinforces the expectation that the year ahead will be harder than the one behind them.
Spending holds, but the cracks are visible
Sentiment surveys capture how people feel, not necessarily what they do next. In past cycles, consumers have sometimes voiced deep anxiety but kept spending, particularly when employment remained strong. During other periods, a sustained drop in confidence translated quickly into postponed car purchases, canceled vacations, and weaker retail sales.
The Conference Board’s expectations subindex has a decades-long track record as a leading indicator. Historically, a prolonged decline has preceded slowdowns in consumer spending within two to three quarters. If the current pessimism persists into summer 2026, economists will be watching retail data, credit-card balances, and savings rates closely for signs that attitudes are translating into pullbacks.
Some early signals are already flashing. Federal Reserve data show that revolving credit balances have climbed steadily, surpassing $1.3 trillion by late 2025. The personal savings rate, tracked by the Bureau of Economic Analysis, has dipped below its pre-pandemic average. Neither trend is alarming in isolation, but together they suggest that some families are bridging the gap between stagnant real income and rising costs by borrowing more and saving less. That is not a strategy with a long shelf life.
What happens if the mood doesn’t lift
The frustration millions of families feel is not imagined, and it is not irrational. Official price data confirm that key costs remain stubbornly high even as the worst of the inflation surge fades. Wages have improved in nominal terms but have barely kept pace with cumulative price increases for the expenses that dominate household budgets: housing, food, childcare, and transportation.
For policymakers at the Federal Reserve and in Congress, the challenge is bridging the gap between an economy that looks healthy in aggregate and one that feels precarious to a growing share of the people living in it. The Fed’s decisions on interest rates in the months ahead will be shaped in part by whether consumer spending holds up or begins to buckle under the weight of pessimism and accumulated costs.
For businesses, the risk is more immediate. If pessimistic consumers pull back on discretionary spending, the slowdown that households fear could become self-fulfilling. Retailers, restaurants, and travel companies are already reporting softer forward guidance in their spring 2026 earnings calls.
The next few months of retail sales reports, credit data, and confidence readings will reveal whether this wave of pessimism is a passing mood or a genuine turning point. But the numbers already make one thing clear: telling Americans the economy is fine has not changed how they experience it.
