For many months, there has been a sense of surprise, sometimes bordering on incredulity, as people forged on even during economic turmoil and uncertainty. They worked, they spent, they paid down debt when pandemic relief funds came in.
There’s been a general sense that things were improving, that the economy would have its soft landing. However, that is no longer clear. Consumer sentiment has been sliding on the whole for a while, and some economic data is starting to come in line with how people have been feeling.
The Beginning And Possible End Of The Soft Landing
An economic soft landing means a gradual lowering of inflation while sustaining reasonable economic growth and employment. It’s the best possible outcome, but doubts have crept in.
The talk started in earnest in the fall of 2023, although even then there were signs of potential long-term disturbance. By January 2025, worries about inflation (because all the previous high inflation had accumulated without equivalent boosts in the incomes of most) started to raise the question of whether the soft landing was still possible.
Concerns have percolated out to consumers, which can be seen in various ways.
One example is the use of credit. When cash was available from the federal pandemic response, people paid down their use of credit, suggesting that, when possible, they’d rather control expenses. Today, use of credit cards and other forms of revolving credit are at historical levels, as this graph from the Federal Reserve Bank of St. Louis shows.
The patterns suggest that when people can afford to turn away from credit, they do. When use sharply rises, it might be a sign of growing confidence among people who know they can pay their bills, but then why would they need higher levels of credit?
Another indicator is consumer sentiment. The University of Michigan has a long history of collecting and analyzing survey data on the topic through the University of Michigan, Survey Research Center, Surveys of Consumers, including its index of consumer sentiment. The index’s normalized value is the first quarter of 1966; each measure is effectively a comparison to that time period. Indexes provide ways to compare values of something at different times in apples-to-apples comparisons. The graph below is a combination of data from May and June in 2025 from the research center and archived values stored by the St. Louis Fed.
Vertically shaded strips represent recessions. The June index value isn’t an historical low, possibly because of recent news stories that might suggest greater economic stability to come. However, from the left-hand side of the graph in 1978, even a 60.5 index, and the overall drop since 2020, is a notable plunge.
Other Economic Data
Some developing data shows that information like growing credit use and consumer sentiments — the latter important because about 69% of GDP is consumer spending — may have been early warning signs.
Retail sales were down 0.9% month-over-month, not the median projection of 0.6% as surveyed by Dow Jones. Retail sales minus autos were down 0.3%, not up the projected 0.1%. The import price index was flat, not down 0.1% as projected. Rather than dropping 0.1%, industrial production fell by 0.2%.
“U.S. consumers held on much more tightly to their wallets in May,” as BMO Economics Chief U.S. Economist wrote on Tuesday, June 17, 2025. “Caution escalated last month as tariff uncertainty and a softening labor market took a toll on consumers’ willingness and ability to spend.”
Oxford Economics said that an apparent U.S.-China trade war “détente” in May took downward pressure off industrial production. But higher oil prices and a tax proposal “deterring inward foreign direct investment” are new risks and production was down 0.2% month-over-month and not the expected 0.1%.
And the home builder confidence index, from the National Association of Home Builders and Wells Fargo, rather than rising from 34 to 35, fell to 32. Anything below 50 is falling confidence.
The potentially scary issue is that there may be little to nothing most consumers, businesses, and even government can do.
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