Americans are doing more than picking gifts this holiday season-they're forecasting the economy.
The University of Michigan's Surveys of Consumers, led by economist Joanne Hsu, offers insights into how consumer sentiment shapes holiday spending and broader economic trends.
With over 75 years of data, the index has become a trusted economic barometer, illustrating that perceptions about the economy often influence its trajectory.
This year, amid a presidential transition, consumer sentiment reveals a partisan divide: Republicans report newfound optimism, while Democrats express growing concerns. Independents, for their part, remain cautiously neutral. For retailers, these shifting sentiments can significantly impact holiday spending patterns.
An interesting phenomenon, according to Hsu, is the rush to purchase durable goods like appliances, electronics and even vehicles. But this isn't necessarily a sign of confidence. A record 25% of consumers are acting out of fear that prices will rise further in the coming year. While this behavior could boost short-term holiday sales, it underscores broader economic uncertainty, she says.
Consumer spending, which drives nearly 70% of the U.S. economy, is deeply influenced by expectations about future conditions. Understanding these sentiments, especially during the holiday season, provides valuable insights into potential economic trends.
"Consumer sentiment isn't arbitrary-it reflects how people perceive the economy now and in the future," Hsu said. "When consumers are optimistic, they're more likely to spend, fueling growth. But if they're worried about a downturn, they hold back, affecting the broader economy. This makes sentiment a critical predictor of economic performance."
