Consumer sentiment nears lowest level ever as worries build over shutdown

The government shutdown in November caused a significant drop in consumer sentiment, according to a University of Michigan survey released recently. The Index of Consumer Sentiment plummeted to 50.3, marking a 6.2% decline from the previous month and a 30% decrease from the same time last year. This is the lowest consumer sentiment has been in over three years, with worries over the shutdown playing a major role in the decline.

The ongoing impasse in Washington has left consumers concerned about the potential negative impact on the economy. This sentiment was felt across all demographics, from age and income level to political affiliation. The current conditions index also took a hit, dropping to 52.3, the lowest in its history dating back to 1951. The future expectations measure fell to 49.0, down 2.6%.

Despite these concerns, measures of inflation remained relatively stable, with a slight decrease in the longer-term outlook. The outlook for one year from now increased to 4.7%, while the five-year measure was at 3.6%, down 0.3 percentage point.

The survey also highlighted disparities in sentiment based on income levels and asset holdings. Interestingly, sentiment among those with the largest stock holdings actually improved by 11%.

With government economic data collection and releases suspended during the shutdown, surveys like the University of Michigan’s play a crucial role in gauging economic progress. It is clear that the government shutdown has had a significant impact on consumer sentiment, with worries about the economy overshadowing other positive factors such as record high stock prices.

Overall, the University of Michigan survey paints a bleak picture of consumer sentiment in the midst of the government shutdown. It will be important to monitor these trends closely as the situation in Washington continues to unfold.