• Consumer sentiment falls to 50.3, the lowest since June 2022.
• The prolonged government shutdown is driving economic concerns across demographics.
• Expectations for inflation rose, while consumer spending remains uneven.

U.S. consumer sentiment weakened significantly, reaching its lowest level in nearly 3-1/2 years as economic concerns mount due to the prolonged government shutdown. The University of Michigan's Consumer Sentiment Index fell to 50.3 in early November, down from 53.6 in October, with widespread dissatisfaction noted among consumers of various ages, incomes, and political affiliations, according to HuffPost and Reuters.

The ongoing shutdown has resulted in major disruptions, particularly impacting lower-income households, with benefit cuts including food assistance and furloughs affecting hundreds of thousands of federal workers. This has led to increased worries about potential negative economic consequences, as described by Joanne Hsu, the director of the Surveys of Consumers, stating that "this month’s decline in sentiment was widespread throughout the population," according to Los Angeles Times and Reuters.

The sentiment drop reflects a broader K-shaped economic recovery, where higher-income households are faring better due to gains in the stock market, whereas lower-income consumers are feeling the effects of the economic slowdown. Consumers with significant stock holdings showed improved sentiment, suggesting that "the wealth effect from the buoyant stock market has strengthened this year," noted Michael Pearce, deputy chief U.S. economist at Oxford Economics, based on insights from Los Angeles Times and Reuters.

Further complicating the situation, consumer expectations for inflation increased slightly to 4.7%, while long-term expectations eased. A notable concern emerged regarding the job market, with surveys indicating that 71% of households anticipate rising unemployment, a significant rise from 52% the previous month. James Knightley, chief international economist at ING, indicated that such expectations have historically culminated in adverse job market outcomes, according to Los Angeles Times and Reuters.