US Consumer Sentiment Pt. 2

What the Data Tells Us

A few things jumped out at me that I didn't expect going in.

The food story is the most dramatic. Americans in 1947 spent 23% of their household budget on food (in 1901, it was 42%!). Today it's 13%, a fundamental transformation of daily economic life driven by agricultural industrialization, supply chain efficiency, and rising real wages. We've been living with cheap food for so long that we've forgotten it's historically unusual.

The housing inversion is equally compelling. For most of the first half of the 20th century, Americans spent more on food than on housing. Those lines crossed sometime in the 1960s and have never crossed back. Food got dramatically cheaper, and the budget share that freed up quietly migrated into shelter costs.

The most telling pattern is the relationship between sentiment and spending pressure. The sentiment index tracks economic conditions to an extent, but it also reveals a delayed and perceived squeeze. The 1979 to 1980 trough, when sentiment hit around 51, came during peak stagflation with food costs still elevated and housing climbing. The 2022 trough at 50, the lowest recorded reading in the dataset, happened when food costs spiked post-pandemic and renter housing hit a modern high of 39% of expenditures. The similarity between those two moments is hard to ignore.

Renter sentiment in particular has reason to be at historic lows. Homeowners with fixed mortgages locked in before 2022 have been relatively insulated, with their housing share holding flat or declining as home values rose. Renters have absorbed nearly all of the housing cost increase of the last 40 years with no equivalent hedge. The 8-point gap between what renters and owners spend on housing today is the widest it's been in the data.

One thing worth flagging: the housing figure in this chart uses the full BLS definition, which includes utilities, furnishings, and household operations, not just rent or mortgage payments. Shelter alone is roughly half of that total, and mortgage principal payments aren't counted at all since BLS treats home purchases as investment. So the homeowner burden shown here is arguably understated for anyone carrying a large post-2022 mortgage.

The data doesn't tell us things are uniformly worse than the past. Food is genuinely cheaper, real incomes are higher, and homes are larger. But for renters in particular, the combination of rising costs and the psychological weight of feeling squeezed on the single largest line item in the budget explains a lot about why sentiment surveys keep coming in low even when the headline numbers look healthy.