Quick Overview

  • The University of Michigan said on Friday that consumer confidence fell to its lowest level since June 2022 this month, as the government shutdown heightened concerns about inflation, the labor market, and the economic outlook.
  • The university reported that in the November survey results, consumers' views on their personal financial situationplunged 17%, and expectations for business conditions over the next year fell 11%, dragging down the sentiment indicator for U.S. households.
  • "With the federal government shutdown lasting more than a month, consumers are now expressing concerns about potential negative consequences for the economy," Joanne Hsu, director of the university's Surveys of Consumers, said in a statement.

In-Depth Analysis

A consumer survey released by the New York Federal Reserve on Friday also showed similar anxiety to that of the University of Michigan. In October, consumers' expectations of losing their job within the next year rose for the third consecutive month to 43%,the highest level since April。

The New York Fed also said the perceived probability of finding a job after losing one fell 0.6 percentage points to 46.8%, still well below its 12-month moving average of 50.6%.

In response to the cooling labor market, the Federal Reserve on October 29cut its key interest rate by 25 basis pointsto a range of 3.75%-4%, marking the second rate cut this year.

Federal Reserve Chair Jerome Powell said the decision received "strong, solid voting support," but also noted there is "strong disagreement" among policymakers on whether to cut rates again at the final meeting of the year on December 10.

According to theCME FedWatch tool, interest rate futures traders see a 66.4% probability of a 25-basis-point rate cut by the central bank next month, up from 63% on October 31.

Since the Fed's decision, central bank officials have emphasized that a rate cut is not a done deal.

"Regarding the future path of the policy rate, I will continue to decide policy based on the latest data, the evolving outlook, and the balance of risks,"Federal Reserve Vice Chair Philip Jefferson said on Friday, noting that "the economy has been growing at a moderate pace."

According to estimates released by the Atlanta Fed on Thursday, the economy may havegrown at an annual rate of 4%。

However, Jefferson noted in his remarks that "labor market conditions appear consistent with a gradual cooling," adding that "downside risks to employment have increased."

He said inflation could remain persistently above the central bank's 2% target, partly due to import tariffs imposed since April. "Market-based long-term inflation expectations remain well anchored."

Hsu said that among consumers, expectations for inflation over the next year rose to 4.7% this month from 4.6% in October.

She said the decline in consumer confidence this month spanned all demographic categories, including age, income, and political affiliation.