The Three Blind Spots in How Consumer Sentiment Is Measured

In March 2020, government officials and epidemiologists were telling Americans to brace for a two-month shutdown. PYMNTS Intelligence went into the field and asked 1,923 consumers directly what they thought. They said five months. In May 2020, the experts said recovery would come by fall. Consumers said February 2021. In December 2020, when officials were projecting a return to normalcy by March 2021, consumers put it at January 2022. They were right every single time.

And no, this wasn’t luck. These weren’t epidemiologists with access to better models. And they didn’t have Dr. ChatGPT to help advise them.

They were ordinary people doing something that spreadsheets can’t. They were factoring in their own fear, their changed habits, their distrust of public spaces and the fact that no one had given them a reason to go back. They knew where they were going to spend: online, away from the physical world. And they knew it was going to be for a lot longer than anyone in Washington or on Wall Street wanted to accept.

Most of those habits stuck.

The inflation story has played out the same way. When the Fed and most economists were calling price pressures “transitory,” PYMNTS Intelligence consumer surveys were already telling a different story. In late 2022, consumers predicted that inflation wouldn’t return to pre-2021 levels until late 2024. And then pushed that forecast out further with each passing month of data. Again, they were closer to right.

And then there are tax refunds.

Forecasters and retailers reliably predict that every spring consumers will use their refunds on discretionary purchases. A little treat, something nice. PYMNTS Intelligence data kept showing otherwise.

If consumers have been right, repeatedly, ahead of schedule and across multiple economic cycles, why does conventional wisdom about consumer sentiment keep getting blindsided?

Among households living paycheck to paycheck and struggling to pay their bills, which represents about 68% of American households, roughly two-thirds of any refund goes straight to everyday expenses or debt repayment. About 16% save or invest it. That “treat yourself” shopping spree doesn’t happen for most American families.

So, here’s the obvious question. If consumers have been right, repeatedly, ahead of schedule and across multiple economic cycles, why does conventional wisdom about consumer sentiment keep getting blindsided?

The answer may be that the instruments we use to measure sentiment were designed for an economy that no longer quite exists.

Three Blind Spots in How We Measure Consumer Sentiment

The foundational index for measuring U.S. consumer sentiment goes back to 1946, when University of Michigan psychologist George Katona started surveying 500 consumers monthly about their economic outlook, not just their spending behavior. It was a real methodological breakthrough. For the first time, economists had a systematic way to track the mood behind the money movement. The University of Michigan Index of Consumer Sentiment has been doing that job ever since.

But the economy has changed in ways the original methodology couldn’t have anticipated. Three structural gaps have opened up between what the classic measures capture and what’s actually driving consumer behavior today.

Blind Spot 1: The Damage From Inflation Was Permanent, Not Transitory

Economists will point to the data and say that inflation has cooled, wages have recovered, unemployment is low. On the surface, things look fine. So why do so many people still feel squeezed?

Because prices never went back down.

When experts say inflation “slows,” that means goods are getting more expensive at a slower rate, not that they’re getting cheaper.

When experts say inflation “slows,” that means goods are getting more expensive at a slower rate, not that they’re getting cheaper. Groceries, rent, utilities, and car insurance are  still dramatically more expensive than they were in 2020. A household that budgeted around 2019 prices, with no extra savings to cushion the blow or with wages that haven’t kept pace, has absorbed years of cumulative damage that the current CPI reading glosses right over. CPI doesn’t reflect the prices people actually remember paying.

READ MORE: Why Consumers Don’t Care About Monthly CPI – and Why it Matters

Traditional sentiment surveys ask consumers whether things are getting better or worse right now. They’re not designed to capture how deep the hole already is after a multi-year price reset. A consumer whose grocery bill has climbed 25% over four years, and whose wages recovered slowly, isn’t confused when they say they still feel financially stressed. They’re accurately describing their situation. The survey instrument is the one missing the finer points.

This is why PYMNTS Intelligence data kept showing consumers pushing their inflation recovery timelines out further, even as pundits were declaring victory. Consumers weren’t ignoring macroeconomic data. They were describing a lived experience that macroeconomic data simply wasn’t built to capture.

Blind Spot 2: Income Has Stopped Being a Reliable Predictor of Spending Behavior

Most economic models are built on a sensible assumption: higher income means more spending. In a world where household balance sheets are stable and monthly obligations are modest relative to what people earn, that holds up.

But that relationship has weakened. And it’s become far more conditional on liquidity, debt load and fixed monthly costs. All these things determine whether a paycheck actually has room in it, regardless of the number on the stub.

In December 2021, PYMNTS Intelligence found that 61% of Americans reported living paycheck to paycheck. By August 2025, that figure had climbed to 71%. What makes this more than a poverty story is who’s inside that number. Nearly half of people earning over $100,000 a year now report the same condition, stretched thin by fixed obligations, debt service and the cost of maintaining a lifestyle that looked affordable before the inflation surge.

It’s the structure of someone’s financial life that determines whether there’s actually room for discretionary spending.

Income still matters, of course, but it’s the structure of someone’s financial life that determines whether there’s actually room for discretionary spending. Whether their fixed obligations leave any margin. Whether an unexpected expense would mean going into debt.

Two people earning identical salaries will make completely different spending decisions if one has three months of savings and the other has none. The number on the pay stub looks the same. The behavioral response to any economic signal does not.

This also explains why the tax refund narrative keeps failing. For a household with a financial cushion, a $2,000 refund is a windfall, something to enjoy. For a paycheck-to-paycheck household, that same $2,000 is a partial offset against overdue bills and high-interest debt. Aggregate income models can’t tell those two households apart. Their spending decisions couldn’t be more different.

Blind Spot 3: Employment and Job Security Are Two Entirely Different Things

A low unemployment rate tells you what percentage of people who want jobs have them. It tells you almost nothing about how secure those people feel in the jobs they hold, whether they believe they could find comparable work if they were let go, or whether technology is quietly eroding the value of their skills in ways that haven’t shown up yet in anyone’s data.

That distinction matters enormously for how people spend.

Decades of research consistently shows that people begin pulling back the moment income feels uncertain, often well before anything bad actually happens. It’s not job loss that triggers spending contraction. It’s the anticipation of possible job loss and the perceived difficulty of replacing it that does. By the time a drop in consumer spending shows up in sales data, the behavioral shift has often been underway for weeks or months.

It’s not job loss that triggers spending contraction. It’s the anticipation of possible job loss.

There’s also a specific kind of worker who represents a real but underappreciated vulnerability here. Someone who feels personally secure in their current role, but who doesn’t believe they could quickly find equivalent work if they had to. They’re not spending freely. They’re spending cautiously, keeping one eye on an exit they’re not sure exists. A headline employment rate captures none of that.

The rise of AI in the workplace makes this more urgent.

Workers whose skills are adjacent to automation are experiencing something with no real precedent in postwar labor economics: a slow, uncertain degradation of occupational value that doesn’t trigger unemployment benefits, doesn’t show up in job-loss statistics and doesn’t register on any existing confidence measure. But it’s absolutely shaping how they think and spend.

A New Instrument for a Different Economy

These three gaps are what drove the development of the PYMNTS Consumer Expectations Index, or PCEI.

On March 2, 2026, PYMNTS Intelligence will launch the PCEI, a monthly, census-balanced survey of more than 2,000 consumers designed to measure U.S. consumer sentiment in a way that’s directly useful for business decision-making. PYMNTS Intelligence Senior Analyst Matt Albrecht has led this effort, bringing three years of experience overseeing the Florida Consumer Sentiment Index at the University of Florida’s Bureau of Economic and Business Research.

The PCEI isn’t meant to replace the University of Michigan Index or the Conference Board Consumer Confidence measure. Those instruments have decades of data behind them and serve real purposes. What the PCEI does is go deeper, and specifically on the structural constraints and risks that classic measures don’t capture as directly.

It builds on traditional sentiment measures such as household finances, economic outlook and purchase climate while extending into the structural constraints that determine whether consumers can actually act on their confidence: debt manageability, savings capacity, emergency readiness and labor-market security. The index maps these across 11 dimensions on a 0 to 100 scale, with 50 as the neutral baseline.

The core idea is straightforward.

Sentiment only drives behavior when households have room to act on it.

Sentiment only drives behavior when households have room to act on it. Optimism without financial capacity isn’t really optimism, it’s a feeling that won’t translate into spending. The PCEI is designed to capture both how consumers feel and how free they actually are to follow through on those feelings.

The framework draws on more than six years of PYMNTS consumer research, spanning hundreds of thousands of respondents across dozens of studies. That body of work is where the pattern became undeniable. Consumers aren’t confused about their own situations. They’re accurately describing conditions that existing measures weren’t built to detect.

What the February Data Says

The headline number for February is 51.5, which is technically above the neutral reading of 50, technically pointing toward cautious optimism. Stop there, though, and you miss the real story.

The more revealing finding is where that aggregate number breaks apart. The spread between consumers who live paycheck to paycheck and those who don’t is more than 10 points. The spread between the highest and lowest generational cohorts is about 7 points.

In a single data point, that comparison captures the whole thesis of the PCEI.

Generation explains how high you’re sitting. Financial structure explains how far you can fall.

The job security numbers deserve a close look because they illustrate the blind spot perfectly. Workers score their personal job security at 83.5. which is solidly positive. They’re not lying awake worrying about layoffs next month. But when asked how quickly they could find a new job at the same pay, that score drops to 48.0, just below neutral.

Secure in place. Not confident about what happens if they need to move.

Today’s spending is holding up not because consumers feel genuinely resilient (a word that the media bandies around freely), it’s holding up because they feel safe staying put. The moment that changes, the calculus shifts fast.

The takeaway isn’t panic, but another measure of fragility. Consumers can feel secure enough to stay in place while still lacking the confidence to take discretionary risks. That’s how a headline number can look stable while the underside remains tight.

Debt confidence at 71.4 is the strongest reading in the index, and it’s worth being precise about what that does and doesn’t mean.

Consumers feel they can manage what they owe, which is actually pretty good in an environment where credit card balances have been climbing steadily. But current financial conditions score only 51.5. People feel like they’re keeping up with obligations. They’re less sure they’re actually getting ahead. That’s stability through management, not through progress. And there’s a ceiling on that kind of confidence.

Generationally, Millennials lead at 60.7, the most optimistic cohort by a meaningful margin. Baby Boomers and Seniors sit at 53.5, closest to neutral. But the more notable pattern is how synchronized the movement has been across all generations. Every cohort softened in November, rebounded in December, eased in January, and improved again in February. The same rhythm, at different altitudes.

When Consumers Know Best

February’s data describes a consumer who is holding on. They’re managing debt, keeping their job, not panicking, but doing so carefully, selectively and with a clear eye on what could go wrong.

Their resilience is real. So is the shaky foundation underneath it. Something that has less to do with what people earn than with how their financial lives are structured.

Whether they have a cushion. Whether their obligations leave room to maneuver. Whether one unexpected expense tips the balance.

Consumers feel the constraints in real time.

Consumers told us the pandemic would last longer than the scientists projected. They told us inflation wouldn’t vanish on the Fed’s timeline. They told us the tax refund wouldn’t become a shopping spree. They were right every time. Not because they’re better forecasters, but because they feel the constraints in real time.

When permanent structural shifts and short-term policy uncertainty are reshaping how people think and spend at the same time, asking only how the consumer is “feeling” may not be the most useful question.

The more practical one is how well the consumer is positioned to act on those feelings.

The data suggests consumers have understood their own situation clearly all along. The question has always been whether the tools used to measure them were designed to actually listen.

 

Until NEXT time.

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PYMNTS CEO Karen Webster is one of the world’s leading experts in payments innovation and the digital economy, advising multinational companies and sitting on boards of emerging AI, healthtech and real-time payments firms, including a non-executive director on the Sezzle board, a publicly traded BNPL provider.

She founded PYMNTS.com in 2009, a top media platform covering innovation in payments, commerce and the digital economy. Webster is also the author of the NEXT newsletter and a co-founder of Market Platform Dynamics, specializing in driving and monetizing innovation across industries.