Sentiment Sits Below Peak-Inflation Lows, and the Top 10% Drives Half of All Spending

Consumer sentiment is lower today than it was when inflation hit its 21st-century peak of 9.1% in June 2022 — even though inflation has since fallen to 3.7% as of September 2026. That's the core paradox hanging over the U.S. midterm elections on Nov. 3, and it's the kind of disconnect that should make any investor, retailer, or policymaker recalibrate what the headline numbers actually tell them.

The University of Michigan's consumer sentiment index, the benchmark gauge economists lean on, is now 10% below where it stood a year ago. That slide comes despite strong consumer spending, robust business investment, and low unemployment, according to Federal Reserve economic data cited in an analysis by Erin Kay Lockwood, Assistant Professor of Political Science at the University of California, Irvine. GDP growth remains solid. Only inflation stays elevated, running stubbornly above the Fed's 2% annual target on the back of tariffs, Middle East energy disruption, and the massive AI build-out.

So the usual explanation — prices are making people miserable — doesn't hold up cleanly. The sentiment data and the inflation data have, in Lockwood's words, become "untethered."

What about wages?

Real wages actually rose between 2022 and the first half of 2026, per Bureau of Labor Statistics data — all while sentiment stayed weak. What's changed recently: inflation-adjusted pay is now falling. That could explain at least part of the darkening voter mood heading into November.

The political stakes are unusually high. A Pew Research survey in early October 2026 found 84% of registered voters call the economy very important to their vote — and it's the least polarized issue Pew measured, with 82% of Republicans and 88% of Democrats ranking it that way. The overall drop in economic outlook has been driven largely by growing pessimism among Republicans, narrowing the gap with the still-gloomier Democrats. Polling gathered by NPR and others points to significant Democratic gains in Congress.

Is inequality the missing variable?

Here's where Lockwood's argument gets practical. Compared with earlier eras of moderate-to-high inflation, today's U.S. economy is much more unequal. Income inequality has climbed over the past 20 years, dipping only during the 2008 and 2020 crises before snapping back.

That matters for how you read the spending data. The Fed has consistently cited strong consumer spending in its economic assessments — its October 28, 2026 statement did exactly that. But the richest 10% of Americans account for half of that spending, per Marketplace's analysis of retail data. Spending by the bottom 80% of earners has fallen behind inflation.

In other words, the robust totals in official reports are driven by a thin slice of wealthy households and don't reflect the experience of the typical consumer — who happens to be the bulk of the electorate. The wealth gap is even starker: the top 0.1% of households together own five times as much wealth as the bottom 50%, a gap widened by uneven stock market gains and the structure of wealth taxation.

It's not just about personal finances

Economists have long assumed survey answers reflect respondents' own circumstances. Lockwood disagrees, siding with scholars who argue people answer based on how they view the economy as a whole — including concerns about equity, opportunity, and economic justice. Social scientists call these "sociotropic" perceptions.

That's not academic hair-splitting. Research suggests voters weight their perceptions of the economy more heavily than their personal finances when judging the incumbent party. Trade policy shows the pattern clearly: Americans' views on tariffs are driven less by personal impact and more by how they think measures affect the country overall.

If sentiment works the same way, that explains the divergence between strong macro trends and weak survey readings. People are judging what kind of economy is being built, not just their own paycheck.

What does this change for the next Congress?

Plenty. Voters historically reward the incumbent party when the economy performs and punish it when it doesn't — and this election will likely read as an indictment of how the economy is working for ordinary Americans under President Donald Trump and the Republican-controlled Congress. If economic insecurity drives that verdict, the incoming class of lawmakers will face pressure to act on it once sworn in. The past six years suggest that improving headline measures alone, without addressing lived experience and inequality, won't be enough to win voters back.