Consumer Sentiment Stays Murky, but Discretionary Spending Splits Along Income Lines
University of Michigan and Conference Board data point in different directions, and the real story is in which income brackets are still opening their wallets.
The two headline gauges of American consumer confidence have not agreed with each other for months, and that disagreement is itself the story. The University of Michigan's Consumer Sentiment Index came in at 52.2 in its preliminary June 2025 reading, near historically depressed territory. The Conference Board's Consumer Confidence Index, which weights present conditions more heavily, has shown more resilience, though it too slipped in May 2025 to 98.0. Analysts who treat either number as a single signal for discretionary retail are reading the wrong chart.
The divergence has a structural explanation. Michigan's survey leans on expectations about personal finances and buying conditions for big-ticket items. The Conference Board tilts toward labor market appraisals. When jobs feel secure but inflation-adjusted wages feel thin, the two indexes pull in opposite directions. That is precisely where much of the workforce sits in mid-2025. For more on the topic discussed above, see National News Desk.
Where the Spending Is Actually Going
Strip out the aggregates and the category picture sharpens. Households in the top income quintile have continued spending on experiential categories: travel, dining, live entertainment. Delta Air Lines and several hotel operators reaffirmed pricing power in their most recent earnings calls. Meanwhile, the bottom two quintiles have pulled back on apparel, home furnishings, and consumer electronics in ways that are showing up in inventory data at mid-tier retailers.
Target's first-quarter 2025 results, reported in May, illustrated the squeeze directly. Comparable sales rose 0.3 percent, but the company flagged softness in discretionary categories including apparel and home goods, while frequency purchases such as food and household essentials held steadier. That is not a sentiment story; it is a budget-constraint story playing out in real time at the shelf level.
This bifurcation matters for anyone making category-level decisions. A merchant or brand manager who prices and assorts for the median consumer is aiming at a customer who is simultaneously less confident about the future and more selective about where discretionary dollars go. That combination rewards specificity: price-to-value clarity, reduced SKU complexity, and promotional mechanics that feel like genuine savings rather than theater.
What the Data Cannot Tell You
Neither Michigan nor the Conference Board captures category-switching behavior in real time. A household that stops buying new furniture but increases spending at warehouse clubs is counted as a sentiment data point, not a strategic reallocation. Operators who want to track actual behavior are better served by card-transaction data from sources such as Affinity Solutions or Earnest Analytics than by waiting for monthly survey releases.
The practical implication is direct: discretionary category operators should treat current sentiment readings as a floor indicator, not a forecast tool. Where income cohort data is available through loyalty programs or transaction feeds, segment it. The aggregate picture is genuinely mixed, but the picture by income band is considerably less ambiguous, and that is where category strategy should be anchored right now.