• Consumer sentiment index drops to 50.4 in November, approaching lowest level ever recorded
• Pessimism spreads across all demographics as month-long federal government shutdown continues impacting economy
• Wealthy stockholders buck trend with 11% sentiment increase as markets remain strong

ANN ARBOR, Mich. (TDR) — Consumer confidence plunged to its lowest level in more than three years as the ongoing federal government shutdown weighed heavily on Americans' economic outlook, according to preliminary data released Friday by the University of Michigan.

The university's consumer-sentiment index fell to 50.4 in November, down a startling 6.2% from October's reading of 53.6. The figure marks the lowest point since June 2022, when the index hit its all-time low amid soaring inflation. The November reading also represents a nearly 30% plunge from a year ago, catching economists off guard who had predicted a slight increase to 54.2.

Widespread economic anxiety

Joanne Hsu, director of the Surveys of Consumers at the University of Michigan, attributed the sharp decline to mounting concerns about the government shutdown's economic impact. The shutdown, which began Oct. 1, has now surpassed the longest in U.S. history at 39 days.

"With the federal government shutdown dragging on for over a month, consumers are now expressing worries about potential negative consequences for the economy," Hsu said in a statement. "This month's decline in sentiment was widespread throughout the population, seen across age, income, and political affiliation."

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The survey revealed that consumers experienced a 17% drop in current personal finances and an 11% decline in year-ahead expected business conditions. The current conditions index slid to 52.3, nearly 11% below last month's reading, while the future expectations measure fell to 49.0.

Stock market wealth divides sentiment

Despite the widespread pessimism, one group bucked the trend. Consumers with the largest holdings in stocks posted a notable 11% increase in sentiment, supported by continued strength in equity markets. The tech-heavy Nasdaq has surged 17% this year, driven largely by artificial intelligence companies.

Michael Pearce, deputy chief U.S. economist at Oxford Economics, noted the significance of this divide. "The top 20% of households by income drive 40% of consumer spending, and we think the wealth effect from the buoyant stock market has strengthened this year," Pearce said.

The disparity highlights the growing economic divide between Americans with significant stock portfolios and those without, as market gains cushion wealthier households from shutdown-related anxieties.

Inflation expectations inch higher

Year-ahead inflation expectations rose slightly from 4.6% in October to 4.7% in November, though the figure remained well below readings from May following major tariff announcements. The uptick suggests consumers remain concerned about price pressures despite the Federal Reserve's efforts to contain inflation.

Economists urge caution

Some economists cautioned against reading too much into the November data. Oliver Allen, senior U.S. economist for Pantheon Macroeconomics, suggested the numbers might be artificially depressed.

"These numbers should be taken with a grain of salt, given the likely temporary drag on confidence from the ongoing government shutdown, plus the Michigan survey's switch to online rather than phone-based sampling last year, which seems to have introduced a structural break that produces more downbeat results," Allen said.

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The survey was conducted before Tuesday's Election Day results, meaning the political landscape's impact on consumer sentiment may shift in coming weeks. With government data collection suspended during the shutdown, alternative measures like the University of Michigan survey have become increasingly important for gauging economic conditions.

Will consumer confidence rebound once the government shutdown ends, or do these numbers signal deeper economic concerns ahead?

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