The record-breaking government shutdown is taking a severe toll on American optimism, according to the latest University of Michigan consumer sentiment survey. The index plummeted from 53.6 in October to 50.3 this month—a level not seen since the historic low of June 2022.
Thank you for reading this post, don't forget to subscribe!Survey director Joanne Hsu stated that consumers are “expressing worries about potential negative consequences for the economy” as the shutdown drags on. This widespread pessimism is shared across all ages, incomes, and political affiliations, leading one economist to warn that the index “looks like the economy is ready to roll over the proverbial cliff.”
The only bright spot was among heavily stock-market-invested consumers, who reported an 11% improvement, providing a measure of resilience for overall aggregate spending. However, the rapidly declining confidence among middle-income groups signals potential trouble for maintaining current economic growth.
Consumer Sentiment Plummets 6.2% in November Amid Shutdown
The University of Michigan’s consumer sentiment index registered a steep decline in November, falling to 50.3 from 53.6 in October. This drop represents a 6.2% decrease month-over-month and a nearly 30% decline (29.9%) compared to the previous year, defying economist expectations for improvement.
The director of the survey, Joanne Hsu, explicitly tied the loss of confidence to the ongoing federal government shutdown. Notably, while pessimism was widespread across most demographics, consumers highly invested in the stock market were an exception, reporting an 11% gain in sentiment, coinciding with near-record stock highs. This group’s continued spending strength is considered critical to the overall resilience of the economy, but the intensifying decline felt by middle-income consumers poses a risk to top-line growth figures.
Economic Alarm Bells Ring as Consumer Sentiment Hits Second-Lowest Point Ever
Americans are getting nervous. As the government shutdown continues to drag on, consumer sentiment has cratered, dropping to 50.3—the lowest reading since the record floor set in June 2022.
The data, captured by the University of Michigan, reflects mounting fear among consumers about the negative consequences of the political gridlock. This dark outlook is nearly universal, hitting every age and income bracket, and leading one chief economist to comment that the index suggests the economy is on the verge of disaster. The only demographic resisting this slump are those enjoying stock market gains, but if the broader public, especially middle-income earners, cuts back on spending, the current pace of economic growth is unlikely to hold.
