U.S. consumer sentiment declined to its lowest level in more than three years and near an all-time low as households' concerns about the economic impact of the government shutdown mounted, according to new data.
The University of Michigan's Index of Consumer Sentiment preliminary reading for November was 50.3, well below the 53.2 expected by economists polled by LSEG.
That's the lowest level for consumer sentiment reported by the index since a reading of 50 in June 2022, when the U.S. economy was beset by the highest level of inflation in 40 years.
"Consumer sentiment fell back about 6% this November, led by a 17% drop in current personal finances and a 11% decline in year-ahead expected business conditions," said University of Michigan Surveys of Consumers Director Joanne Hsu said. "With the federal government shutdown dragging on for over a month, consumers are now expressing worries about potential negative consequences for the economy."
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"This month's decline in sentiment was widespread throughout the population, seen across age, income, and political affiliation," Hsu said. "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."
Consumers' expectations of inflation ticked higher from 4.6% last month to 4.7% in the preliminary November report – though they remained well below the readings recorded in May following the Trump administration's initial tariff announcements.
Longer-run inflation expectations dipped from 3.9% last month to 3.6% in November. Inflation expectations are now below the midpoint between the readings seen a year ago and the 2025 peak reading in April.
Inflation has trended higher in recent months as tariffs raise costs for businesses that are passed on to consumers. The September consumer price index showed inflation reached 3% for the first time since February, which is well above the Federal Reserve's 2% target rate.
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Fed Chairman Jerome Powell has spoken about the importance of keeping longer-term inflation expectations "well-anchored" near the Fed's target as policymakers weigh interest rate moves.
Hsu noted that interviews for this release closed before the elections held on Tuesday. The final consumer sentiment results for November will be released on Nov. 21.
