Consumer sentiment in the United States fell sharply this month, signaling the depths of concern Americans are feeling about the economy. This is a sentiment decrease of 6.2% since October based on recent data. On top of that, there has been a mind-blowing 29.9% drop compared to this time last year. Here at home, the federal government shutdown has reached its second month. This plight is leading millions of Americans, even those in their 30s and 40s, to become just as discouraged about their prospects in retirement.
Joanne Hsu, the director of surveys of consumers at the University of Michigan, highlighted the severity of the current sentiment. She pointed out that the numbers for this month indicate the lowest level of consumer confidence since the month of June 2022. That month was the lowest ever recorded in that survey, which has been conducted since the 1950s.
The extended federal government shutdown has only increased fears among consumers that disaster might befall the economy. Federal services are frozen, producing extreme unpredictability regarding federal operations. In turn, Americans are growing more and more fearful about their economic future.
“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, director of surveys of consumers at the University of Michigan.
Both soaring inflation and climbing interest rates are scary enough. The government shutdown has piled on top of that perfect storm of economic anxiety. Consumers are looking a lot harder at their spending with money being tight as it is. They are modifying their fiscal choices now, in anticipation of longer-term economic headwinds.
According to the Brookings Institution, experts warn that consumer sentiment is the most important indicator of economic health, impacting every facet of consumer spending and investment. A drop in sentiment is likely to result in a cutback in consumer spending—consumer spending makes up about 70 percent of the U.S. economy.