US Consumer Sentiment Hits Near-Record Low Amid Shutdown

The University of Michigan’s preliminary November sentiment index dropped 3.3 points to 50.3, placing it just above the June 2022 reading of 50 that represented the weakest consumer confidence level in data extending back to 1978. This dramatic decline marks one of the most significant drops in recent memory and approaches the historic low point recorded during last year’s peak inflation period. The current reading sits perilously close to the record bottom, indicating that American consumers are nearly as pessimistic now as they were during the worst economic sentiment period in over four decades.

The severity of this decline caught economists by surprise, with the gauge coming in lower than all but one estimate in a Bloomberg survey of economic experts. This unexpected drop suggests that underlying economic concerns may be more profound than previously understood by market analysts and policymakers. The University of Michigan data, long considered a reliable indicator of consumer behavior and economic trends, now points to a potentially significant shift in how American households perceive their financial futures.

Perhaps most concerning is the comprehensive nature of this sentiment decline. The report showed the drop in overall confidence was broad across age, income, and political groups, indicating that economic concerns are not limited to specific demographic segments but rather reflect a nationwide phenomenon. This universal decline suggests fundamental economic pressures affecting Americans regardless of their financial situation, generation, or political affiliation.

Among Democrats and political independents, confidence slid to the lowest levels in data back to 1984, representing a particularly stark deterioration in outlook from traditionally more optimistic voter groups. The across-the-board nature of this sentiment collapse underscores how government dysfunction and persistent inflation are creating a unified climate of economic anxiety that transcends traditional political and demographic divisions.

The primary drivers behind this historic sentiment collapse are clearly identified in the University of Michigan report. The looming threat of a government shutdown weighed heavily on the economic outlook, creating uncertainty about federal operations, potential disruptions to government services, and broader economic stability. This political uncertainty compounds existing economic worries, creating a perfect storm of consumer anxiety.

Simultaneously, high prices continue to sour views about personal finances, with inflation remaining a persistent concern for American households. Despite some moderation in inflation rates from their peaks, the cumulative effect of years of elevated prices has taken a significant toll on consumer psychology and spending power. As Bloomberg Economics US and Canada Economist Stuart Paul and Bloomberg News Senior Editor have noted, these dual pressures create a challenging environment for both consumers and policymakers seeking to restore economic confidence.

The combination of political instability through potential government shutdowns and ongoing financial pressure from elevated prices creates a feedback loop where economic pessimism becomes self-reinforcing. When consumers expect economic difficulties ahead, they typically reduce spending and increase savings, which can itself contribute to slower economic growth—potentially validating their initial concerns and creating a cycle of declining confidence and economic performance.