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Consumer sentiment rebounds in advanced economies

Consumer sentiment rebounds in advanced economies

04/05/2025
Giovanni Medeiros
Consumer sentiment rebounds in advanced economies

After months of pessimism, recent surveys reveal a turnaround in how consumers view their financial future across major markets. A combination of easing trade tensions, improved inflation expectations, and shifting preferences has fueled this rebound, though underlying vulnerabilities remain.

Recent Rebound in Consumer Confidence

In the United States, two headline measures illustrate the revival. The Conference Board Consumer Confidence Index climbed to 98.0 in May, a jump of 12.3 points from April’s 85.7 reading. The University of Michigan’s Index of Consumer Sentiment rose 16% month-over-month in June to 60.5, marking its first increase in half a year.

Globally, these gains mirror trends in other advanced economies, where sentiment metrics remain modestly below pre-pandemic levels but show clear upticks. Analysts attribute the success to multiple factors, including trade policy adjustments and softer inflation forecasts.

Key Drivers of the Sentiment Upswing

Several interlinked elements contributed to this positive shift. Together, they help explain why consumers are gradually regaining confidence after a period characterized by uncertainty and caution.

  • Easing of global trade tensions: Tariff de-escalation in early 2025 alleviated fears of a prolonged trade war and stabilized import costs.
  • Recalling robust labor market fundamentals: Although job-availability outlooks have softened, unemployment remains near historic lows, underpinning household optimism.
  • Moderating inflation expectations: Year-ahead inflation forecasts dropped from 6.6% in May to 5.0% in June, reducing one of consumers’ most pressing worries.
  • Renewed faith in business conditions: Improved perceptions of future income and business health bolstered forward-looking sentiment.

The Macroeconomic Paradox

A striking contrast has emerged between upbeat headline indicators and lingering pessimism at the household level. Despite solid GDP growth, low unemployment, and corporate earnings beats, surveys still report cautious spending intentions.

This divergence highlights a persistent paradox between data and perception where consumers discount macroeconomic strength in favor of daily cost pressures. Half of U.S. households still cite rising prices as their chief concern, even as overall inflation trends stabilize.

Shifts in Consumer Preferences

Beyond sentiment scores, spending patterns reveal a growing emphasis on local and domestic brands. Surveys indicate that nearly half of global consumers now consider domestic sourcing a key purchase driver.

  • Preference for local brands rose sharply, especially in North America, as consumers seek to support home-grown businesses and simplify supply chains.
  • Economic nationalism gaining traction as geopolitical uncertainties encourage shoppers to prioritize reliability over novelty.
  • Generational divides emerging, with Gen Z expressing tighter budget constraints and older cohorts most alarmed by inflation.

Demographic and Regional Variations

Sentiment recovery is far from uniform. Older consumers, who allocate a larger share of income to essentials, report the greatest unease over price increases. Younger adults, while more optimistic about future opportunities, are more likely to tap savings to maintain lifestyles.

In Europe, attitudes toward American brands have cooled, with 42% of respondents expressing less favorability compared to the start of 2025. This contrasts with stronger confidence rebounds in Canada and Australia, where domestic economic policies have been perceived as more stable.

Implications for Consumer Spending and Policy

Consumer spending drives roughly 67.7% of U.S. GDP, making these sentiment trends vital barometers for growth forecasts. The recent rebound suggests a potential pickup in discretionary outlays, especially in services and higher-margin goods.

However, policymakers and business leaders must balance optimism with caution. Overconfidence can spur inflationary pressures, while undue pessimism may stall recovery. Crafting targeted fiscal and monetary measures to anchor expectations will be essential.

Future Outlook and Why Sentiment Matters

Looking ahead, consumer sentiment will likely hinge on developments in global trade, wage growth, and inflation trajectories. Continued dialogue between governments and central banks on avoiding abrupt policy shifts can sustain the positive momentum.

Ultimately, understanding sentiment dynamics offers a window into future demand patterns, investment strategies, and risk management. Businesses that monitor these indicators can better align product offerings, marketing strategies, and inventory decisions with evolving consumer moods.

While the recent upswing is a welcome respite from earlier gloom, the recovery remains fragile. Maintaining constructive expectations alongside prudent safeguards will determine whether this rebound evolves into a lasting renaissance in consumer confidence.

Giovanni Medeiros

About the Author: Giovanni Medeiros

Giovanni Medeiros