The shutdown led to a sharp decline in US consumer confidence

A closely watched poll on Friday found that consumers have felt relatively unfazed by the US government shutdown so far.

Michigan’s consumer confidence index fell to 50.3 in November’s preliminary reading, a low not seen since June 2022, when Americans were suffering from runaway inflation. Economists surveyed The Wall Street Journal and Dow Jones Newswires We had expected a slight decline in the Sentiment Index from last month’s reading of 53.6.

Moreover, consumers’ assessment of current economic conditions was the lowest in the 73-year history of the University of Michigan survey. The index is based on consumers’ opinions about the current economy and their expectations of future economic conditions.

While concerns about inflation persist, the survey showed that the current government shutdown is also affecting people’s perceptions of the economy. Survey results conducted in early October showed that the lockdown had not yet registered with consumers. The initial poll ended ahead of Tuesday’s election, which saw Democrats win several state and local races.

“With the federal government shutdown lasting more than a month, consumers are now expressing concerns about the potential negative consequences for the economy,” survey director Joan Hsu said in a statement.

Sentiment has broadly declined, with only large cap holders seeing improvement

The decline in sentiment was widespread across age groups, income levels and political affiliation, Hsu said. The only group that showed improvement were large shareholders, who saw a series of new market highs during the survey period.

The survey results come as the government shutdown enters its thirty-eighth day. Funding for most government agencies and programs ended on October 1 when Republicans and Democrats in Congress could not reach an agreement on how to fund the government.

So far, one of the main consequences of the shutdown has been a freeze on government economic data, because workers collecting the information are not at work.

But more areas of the economy are starting to be affected, including air travel, as poor staffing levels for unpaid air traffic controllers prompted officials to cut air traffic by 10% at 40 airports. The closure also threatens the delivery of food aid payments.

Inflation expectations also rose in the poll, which is important because the Fed closely considers people’s feelings about price pressures when it makes decisions about interest rate moves.