Consumer sentiment drops for third consecutive month

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We’re still in the bad vibes economy.

The University of Michigan’s preliminary consumer sentiment reading for November dropped to its lowest point since June 2022. The record-breaking federal government shutdown drove the decrease in consumer confidence.

The index fell from 53.6 in October to 50.3 in November and has fallen almost 30% year over year. Consumers expressed pessimism about their own personal finances with a 17% drop, as well as an 11% decline in business conditions expected in the year ahead. The decline in sentiment was recorded across demographics.

“With the federal government shutdown dragging on for over a month, consumers are now expressing worries about potential negative consequences for the economy,” Joanne Hsu, the survey’s director, said in a statement.

K-shaped. Consumer gloom and doom are showing up across multiple surveys. According to a recent Federal Reserve Bank of New York study, employee anxiety grew as the perceived probability of higher unemployment a year from now reached 43% in October, up for the third consecutive month. And employee confidence in finding a job after being laid off dropped 0.6 percentage points to 46.8%.

However, one group is still feeling fairly sunny: The University of Michigan survey showed an 11% jump in sentiment for consumers with large stock holdings, as the stock market continues to be strong, a continued sign of the K-shaped economy, in which high-income households are doing fine, while those with lower incomes are facing challenges. So overall spending is remaining strong as high-income households don’t feel much of a squeeze.

But lower income households are facing pressures on many fronts. Tariffs adversely affect lower-income households more than higher-income ones because the increased prices represent a larger share of their income. And the stalled labor market also seems to be affecting entry-level and low-income workers more.