Additional Coverage:
- Consumer sentiment slides to near-lowest level on record as government shutdown drags on (foxbusiness.com)
Consumer Confidence Takes a Nosedive Amid Government Shutdown Worries
U.S. consumer sentiment has plummeted to its lowest point in over three years, nearing an all-time low, as mounting concerns over the economic fallout of the ongoing government shutdown weigh heavily on households.
The preliminary reading for November from the University of Michigan’s Index of Consumer Sentiment registered a concerning 50.3. This figure falls significantly short of the 53.2 economists polled by LSEG had anticipated.
This recent dip marks the lowest level recorded by the index since June 2022, when consumer sentiment hit 50 during a period when the U.S. economy grappled with the highest inflation rates in four decades.
Joanne Hsu, Director of the University of Michigan Surveys of Consumers, highlighted the significant decline. “Consumer sentiment fell back about 6% this November, led by a 17% drop in current personal finances and an 11% decline in year-ahead expected business conditions,” Hsu stated. “With the federal government shutdown dragging on for over a month, consumers are now expressing worries about potential negative consequences for the economy.”
The drop in sentiment was widespread across various demographics, impacting individuals of different ages, income levels, and political affiliations. Hsu noted one key exception: “consumers with the largest tercile of stock holdings posted a notable 11% increase in sentiment, supported by continued strength in stock markets.”
Regarding inflation, consumers’ expectations for the year ahead edged up from 4.6% last month to 4.7% in the preliminary November report. However, these figures remain considerably lower than the readings observed in May following the initial tariff announcements by the Trump administration.
Longer-run inflation expectations saw a slight decrease, moving from 3.9% last month to 3.6% in November. Current inflation expectations are now situated below the midpoint between last year’s readings and the 2025 peak recorded in April.
In recent months, inflation has shown an upward trend as tariffs continue to elevate costs for businesses, which are then passed on to consumers. The September consumer price index indicated that inflation had reached 3% for the first time since February, a rate notably above the Federal Reserve’s target of 2%.
Fed Chairman Jerome Powell has consistently emphasized the importance of maintaining “well-anchored” longer-term inflation expectations near the Fed’s target as policymakers deliberate future interest rate adjustments.
It’s worth noting that interviews for this latest sentiment release concluded before the elections held on Tuesday. The final consumer sentiment results for November are slated for release on November 21st.