United States consumer sentiment just reached its 7th lowest all-time level since 1952. This drop is evidence of the increasing impatience that Americans are expressing over the state of the economy. Their consumer sentiment index, from the University of Michigan, had a preliminary reading of 55. That would represent a drop in consumer confidence in the first week of this month. Even more surprisingly, the decline continues in the face of the recent federal government shutdown. Consequences of this shutdown have forced over a million federal employees to be furloughed or work without pay.
Shutdowns almost always lead to concerns about the state of the economy. The key economic issue for Americans right now is the high cost of living amid a rapidly deteriorating labor market. This indicates that their economic expectations are influenced more by changes to their own pocketbooks than by major political events.
Joanne Hsu, the director of the survey, noted that “pocketbook issues like high prices and weakening job prospects remain at the forefront of consumers’ minds.” At the moment, consumer sentiment is in the gutter. Such deep pessimism has not been produced since the immediate post-World War II period.
In recent months, America’s economic mood has darkened considerably. Increasing worries about rising costs have created a crisis of confidence among consumers concerned about their financial prospect. Likewise, the recent softness of the labor market has only heightened these concerns.
Hsu remarked that “consumers do not expect meaningful improvement in these factors.” These kinds of sentiments suggest that most people are preparing for more economic pain instead of looking forward to an upturn.
Such a drop in consumer sentiment would be historic. Year after year, it has failed to accurately forecast future spending trends. It begs the question of how concerns about consumer perception will drive economic recovery efforts in the future.