The Conference Board's January measure of US consumer confidence is surprisingly weak, dropping to 84.5 from an upwardly revised December print of 94.2, and well below the 91.0 consensus prediction, notes James Knightley, chief international economist, US, for ING.

The current conditions index and the expectations component fell by similar amounts with headline sentiment at its weakest since 2014 – so things are apparently worse for households today than they were post the 'Liberation Day' fallout and the pandemic.

But consumers keep spending, which leads Knightley to observe "the relationship between sentiment and spending has broken down of late with sentiment surrounding the economic outlook at levels historically consistent with static spending, whereas real consumer spending expanded at 3.5% growth in 3Q 2025.

"This divergence likely reflects the narrative that the top 20% of households by income are driving the growth story while the bottom 60% by income are treading water. It is the median household, which is going to be within that bottom 60%, that is reflected in the sentiment survey," he says.

This provides ongoing evidence of the K-shaped story of the US economy, Knightley says. The bottom 60% are worried about their jobs, worried about tariffs squeezing spending power and with Federal Reserve data showing that the bottom 60% of households hold only 15% of total household wealth, they have not benefited much from the surge in property and stock prices.

The top 20% of households by income spend more on services, so are not impacted by tariffs to the same degree, have a better sense of job security, and they hold 70% of household wealth. This bifurcation shows little sign of changing in the near term.

On the day Knightley released his note to clients, UPS announced it woudl lay off 30,000 workers on top of 48,000 it laid off last year. With 23.9% of respondents saying "jobs are plentiful" while 20.8% say "jobs are hard to get," a net reading of 3.1%, Knightley says the risk is that unemployment will keep ticking higher. "People see and feel changes in the jobs market before the show up in the data," he says.