Some economists and policymakers look at data on consumer confidence from The Conference Board and similar datasets to gauge how people are feeling about the economy overall.

Consumer confidence has rebounded somewhat from pandemic-era lows. In recent months it’s been all over the place, but generally trending down. But there’s a disconnect between people’s negative economic outlook and their actual spending habits. 

Consumer spending makes up a whopping 70% of GDP. So tracking how shoppers feel is important.

“How people feel about the economy affects their behavior and their behavior then affects the economy once again,” said Joanne Hsu, director of a consumer sentiment survey at the University of Michigan. She said inflation and high interest rates are dimming many people’s outlook.

And yet, there’s something puzzling going on.

“(American consumers)have maintained robust spending in the face of a lot of hardship and high inflation,” Hsu said.

In the past, Hsu said, high inflation has led to poor consumer confidence — like we’ve seen over the last few months — and that has led to reduced spending. These indexes have even been used to predict recessions in the past.

“We’ve had lots of analysts and experts and consumers alike, all bracing themselves for a recession that hasn’t quite come yet,” Hsu said.

So the old calculations might not work in today’s strange economy. Claudia Sahm agrees. She’s a consultant and former Federal Reserve economist who used to pay very close attention to consumer confidence reports. But she’s giving it less weight now.

“It is just not lining up with our spending data,” she said.

So what’s going on? Well, Sahm said people are looking around at all the economic panic — from the debt ceiling to inflation to high interest rates — and the landscape at large looks grim. But in their own personal financial lives, consumers are generally doing OK. They have jobs with decent wages. They maybe even have savings. It makes interpreting survey results a little squirrely. 

“I think people look at (the consumer confidence figures) and try to find the story to fit into it,” said Sucharita Kodali, a retail analyst at Forrester. “But much much more crucial than how people feel is what they’re actually doing with their money.”

And what consumers are doing — at least for now — is they’re still spending. That’s good for business. But not what the Federal Reserve needs to get a handle on inflation.