Consumer Confidence Continues Its Downturn in November as Price Pressures Persist

The University of Michigan’s latest consumer sentiment report reveals that economic pessimism continues to deteriorate, though at a slightly slower pace than initially reported. Friday’s data showed the consumer sentiment index standing at 51.0 for November—better than the preliminary estimate of 50.3 but still disappointing compared to the month prior.

The revised reading fell short of economist expectations for an upward revision to 50.5, underscoring the continued fragility of consumer confidence. While the federal government shutdown’s resolution provided a modest sentiment boost mid-month, the overall index remains deeply depressed, hovering near the record low of 50.0 reached in June 2022. October’s reading of 53.6 now appears relatively resilient in comparison.

Current Conditions Show Steeper Deterioration

The most concerning aspect of the report is the sharp decline in current economic conditions. The current conditions index plummeted to 51.1 in November, a dramatic drop from October’s 58.6—marking a record low for this metric. This suggests consumers perceive the immediate economic environment as increasingly challenging.

“After the federal shutdown ended, sentiment lifted slightly from its mid-month reading,” explained Joanne Hsu, Director of Surveys of Consumers. However, she cautioned that this modest improvement masks deeper concerns. “Consumers remain frustrated about the persistence of high prices and weakening incomes,” Hsu stated.

Most tellingly, measures of current personal finances and buying conditions for durable goods each declined by more than 10% in the month, indicating consumers are pulling back on major purchases amid financial pressure.

Mixed Signals on Future Outlook

In contrast to the deteriorating present, the index of consumer expectations improved modestly, rising to 51.0 in November from 50.3 in October. This suggests consumers harbor some optimism that conditions may eventually improve, though the absolute level remains historically weak.

The report offered more encouraging data on the inflation front. Year-ahead inflation expectations edged down to 4.5% in November from 4.6% in October, though this remains significantly above the 3.3% level seen in January. Long-term inflation expectations showed more substantial improvement, decreasing to 3.4% in November from 3.9% in October.

Yet despite these improvements in inflation trajectories, Hsu emphasized that relief remains theoretical rather than practical for most households. “Consumers continue to report that their personal finances now are weighed down by the present state of high prices,” she noted, highlighting the lag between declining inflation expectations and the actual purchasing power struggles consumers face today.

The disconnect between improving inflation forecasts and deteriorating current conditions underscores a critical challenge: while the trajectory may be favorable, immediate financial pressures from the cumulative effect of higher prices continue to constrain consumer behavior and sentiment.