• The University of Michigan's final November consumer sentiment index fell sharply to 51, marking the second-lowest reading on record.
  • One-year inflation expectations eased slightly to 4.5% but remain historically elevated.
  • The record-long government shutdown and persistent inflation concerns are driving widespread pessimism across nearly all demographic groups.

Sharp Decline in Consumer Outlook

U.S. consumer sentiment deteriorated significantly in November, with the University of Michigan's final reading dropping to 51—just above the all-time low recorded in June 2022. The figure came in slightly above economist expectations of 50.5 but represents a nearly 30% decline from year-ago levels, according to people familiar with the survey data.

The sustained government shutdown, now in its record-long stretch, has amplified consumer worries about job prospects and government support programs. Survey director Joanne Hsu noted that "concerns about both inflation and politics dominated consumer responses" throughout the month, with particular emphasis on how the political stalemate in Washington is affecting economic stability.

Inflation Expectations Show Limited Improvement

While the one-year inflation expectation moderated to 4.5% from October's 4.7%, the reading remains well above levels that would comfort Federal Reserve officials. The five-year outlook showed more substantial improvement, dipping to 3.6% from 3.9% previously. Still, inflation concerns continue to weigh heavily on household assessments of their personal finances, which dropped 17% month-over-month.

Nearly all demographic groups reported declining sentiment, with the notable exception being households heavily invested in equities. The divergence highlights how strong stock market performance has provided some buffer for wealthier Americans even as broader economic anxieties mount.

Economic Implications

The persistent pessimism suggests potential headwinds for consumer spending as the holiday season approaches. Year-ahead business expectations fell 11% in the survey, indicating that households are bracing for tougher economic conditions. Multiple respondents mentioned believing the U.S. economy is already in, or close to, a recession, according to people familiar with the survey methodology.

Economists expect only gradual improvement in sentiment through 2026 and 2027, contingent on resolution of the government shutdown and more substantial progress on inflation. The University of Michigan declined to comment beyond the published report when reached Thursday afternoon.

Correction: An earlier version of this article misstated the month of the previous record low in consumer sentiment. It was June 2022, not June 2023.