It is fair to say that the relationship between sentiment and spending has broken down of late with sentiment surrounding the economic outlook at levels historically consistent with static spending, whereas real consumer spending expanded at 3.5% growth in 3Q 2025. This divergence likely reflects the narrative that the top 20% of households by income are driving the growth story while the bottom 60% by income are treading water. It is the median household, which is going to be within that bottom 60%, that is reflected in the sentiment survey.
This provides ongoing evidence of the K-shaped story of the US economy. The bottom 60% are worried about their jobs, worried about tariffs squeezing spending power and with Federal Reserve data showing that the bottom 60% of households hold only 15% of total household wealth, they have not benefited much from the surge in property and stock prices. The top 20% of households by income spend more on services, so are not impacted by tariffs to the same degree, have a better sense of job security, and they hold 70% of household wealth. This bifurcation shows little sign of changing in the near term.