The unprecedented government shutdown has resulted in a deterioration of Americans’ perceptions regarding the economic outlook. The most recent consumer sentiment survey indicates a decline in the index, which has decreased to 50.3 this month from 53.6 in October. The current level represents the lowest point since June 2022, which itself was the lowest recorded reading since the survey began in the 1950s. “With the federal government shutdown dragging on for over a month, consumers are now expressing worries about potential negative consequences for the economy,” stated Joanne Hsu, director of surveys of consumers at the University of Michigan.
The decrease observed this month signifies a 6.2% reduction from October and a substantial 29.9% decrease relative to the same period last year in November. Meanwhile, a survey of economists had projected a modest enhancement for this month. “The index certainly looks like the economy is ready to roll over the proverbial cliff,” stated Chris Rupkey, an economist, in a commentary issued Friday. The heightened degree of pessimism was “widespread” among various age groups, income brackets, and political affiliations, Hsu observed.
The singular notable exception was consumers who are significantly engaged in the stock market. An 11% improvement in sentiment has been reported as the equity market hovers near record highs. The significance of that consumer group cannot be overstated, as they exert “the biggest influence on the aggregate consumer spending data, so continued strength here is important for the resilience of the economy overall,” noted Thomas Simmons.
“However, the middle tercile holds significance as well, and the deterioration in their sentiment seems to be escalating. If this group is unable to continue to keep up their pace of spending, the top-line growth numbers may finally break from their above-trend pace,” he said.