Consumer Sentiment Drops in November
Consumer sentiment, also known as consumer confidence, measures how U.S. consumers feel about the economy, wages, jobs and their personal finances.
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Senior Editor & Content Strategist Updated on Nov. 7.
University of Michigan: Index fell in November
The University of Michigan’s Index of Consumer Sentiment dropped in November, according to the first report for the month released on Nov. 7.
Joanne Hsu, who directs consumer surveys at the University of Michigan, said that the government shutdown is taking its toll on consumers’ expectations.
“With the federal government shutdown dragging on for over a month, consumers are now expressing worries about potential negative consequences for the economy,” said Hsu in the report. This month’s decline in sentiment was widespread throughout the population, seen across age, income, and political affiliation. One key exception: consumers with the largest tercile of stock holdings posted a notable 11% increase in sentiment, supported by continued strength in stock markets.”
What a NerdWallet expert says
Elizabeth Renter, NerdWallet’s senior economist, said of the report:
Consumers broadly are feeling nearly as bad about the economy this month as they were this past spring, in the wake of Liberation Day. With price growth still elevated, the labor market is freezing out jobseekers and lawmakers have stopped the federal government from functioning. Is anyone surprised that economic sentiment is in the tank? Perhaps those holding stocks. Today’s data suggests people holding the most stocks are actually feeling better this month. When your portfolio is doing well, it’s a little easier to be optimistic. But we know the market is fickle, and this pocket of optimism can’t be wholly counted on.
Across the economy, segments of the population are increasingly dealing with tighter financial conditions. That’s certainly true for federal workers and people dependent on food assistance from the federal government. But it’s also likely increasingly true for middle income Americans. Debt levels are rising and delinquencies are growing across auto loans and credit cards. As household finances get tighter, negative economic headlines — such as those about the shutdown — stand to have a bigger impact on outlooks.
More findings from the University of Michigan
The University of Michigan Index of Consumer Sentiment’s first reading for November registered at 50.3, compared to October’s reading of 53.6, according to the first survey released on Nov. 7.
The university’s Index of Current Economic Conditions registered at 52.3 for November, compared to 58.6 for October, while the Index of Consumer Expectations went down to an all-time historic low of 49 in November, compared to 50.3 in October and 51.7 in September. The record low was previously 50 in June 2022.
New York Fed: Consumers ambivalent on job security
The New York Fed’s Survey of Consumer Expectations for October, released on Nov. 7, shows consumers are having mixed feelings about the labor market:
- The mean probability that the U.S. employment rate will increase a year from now increased to 42.5%.
- The probability of finding a job if one’s current job is lost fell to 46.8%.
- The probability of losing one’s job in the next year dropped to 14%.
Other findings:
- Inflation: Median inflation expectations for the next year decreased to 3.2% in October from 3.4% in September. The expectation that inflation would increase over the next three years and five years was unchanged.
- Personal finance: Households’ assessment of current finances and expectation for Americans’ household financial situation in the next year both down.
Conference Board: Confidence remains unchanged in October
The Conference Board’s Consumer Confidence Index report for October (released Oct .28) went down by 1 point in October to 94.6 from September’s upwardly revised figure of 95.6. The Present Situation Index rose, while the Expectations Index declined.
Consumers are more optimistic about current business conditions, as well as current job availability compared to September, according to commentary by Stephanie Guichard, a senior economist at The Conference Board, in a press release. But there’s still pessimism about the future.
“All three components of the Expectations Index weakened somewhat,” said Guichard. “Consumers were a bit more pessimistic about future job availability and future business conditions while optimism about future income retreated slightly.”
Some key takeaways from the report:
- Inflation, political concerns continue. Guichard said consumer’s write-in responses mainly referenced prices and inflation. Consumers also expressed concern about U.S. politics, as well as the government shutdown.
- Stock price expectations remain strong. Nearly half of all consumers expert stock price increases in the next 12 months.
- Consumers think the U.S. economy has tanked. For the third month in a row, consumers said they believe the economy is in a recession.
- Consumers expect lower holiday spending. Consumers say they’ll likely spend 3.9% less on gifts and 12% less on non-gifts heading into the holiday season.
More findings from the Conference Board
The Conference Board’s Consumer Confidence Index went down 1 point in October’s report to 94.6, the latest report released on Oct. 28 shows.
The board’s Present Situation Index — measuring consumers’ current assessment of business and labor market conditions — rose 1.8 points to 129.3.
The Expectations Index — measuring consumers’ short-term outlook for income, business and labor market conditions — declined 2.9 points to 71.5. The same index was at 54.4 in April, the lowest level in nearly 14 years.
What is consumer sentiment?
Consumer sentiment, also known as consumer confidence, is an index of how U.S. consumers are feeling about the current and future state of the economy, and all that folds into the economy: the job market, wages, business conditions and their personal finances. It’s a valuable tool for economists, as consumer sentiment can be used as an early predictor of economic changes.
How people feel about the economy can directly impact the economy, because consumers' attitudes often affect how much they spend on things like food, transportation, household goods, entertainment and more.
» Stay informed: Check out our news hub for all the latest.
In 2023, consumers’ personal spending made up 67.9% of the U.S. GDP, or gross domestic product, according to the Federal Reserve Bank of St. Louis. That’s a significant majority of the nation’s GDP, so keeping a close eye on consumer sentiment is key in foreseeing potential economic slumps or rallies.
When the economy is in a recession, consumer sentiment falls. On the flip side, when the economy is expanding, consumer sentiment rises. The index does typically peak before a recession, though.
Unlike other indexes, such as the Consumer Price Index (CPI), consumer sentiment isn’t calculated using spending data or hard figures. Instead, economists rely on two major surveys of consumer confidence: The University of Michigan’s Surveys of Consumers and the Conference Board’s Consumer Confidence Survey.
Each survey collects the general attitudes and opinions of hundreds of U.S. consumers. Then, those opinions are assigned numeric values and aggregated into one number, or index.
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What is consumer sentiment like right now?
The University of Michigan’s Index of Consumer Sentiment
The first reading for November from the University of Michigan, released on Nov. 7, shows:
- The Index of Consumer Sentiment registered at 50.3 for November, down from 53.6 for October.
- Current Economic Conditions registered at 52.3 for November, down from 58.6 for October.
- The Index of Consumer Expectations registered at 49 for November, down from 50.3 for October.
How the University of Michigan creates its index
The Index of Consumer Sentiment is one of three indexes derived from the University of Michigan’s Surveys of Consumers, which started in 1946. Originally conducted annually, the surveys switched to a monthly cadence in 1978. The surveys have a sample size of roughly 600 people selected randomly from the 48 adjoining U.S. states and the District of Columbia.
The surveys include roughly 50 questions covering personal finances, business conditions and buying conditions. From those surveyed, three indexes are produced: the Index of Consumer Sentiment, the Index of Consumer Expectations and the Index of Current Economic Conditions.
The Index of Consumer Sentiment is the most commonly cited index of the bunch. It’s derived from these five questions:
- "We are interested in how people are getting along financially these days. Would you say that you (and your family living there) are better off or worse off financially than you were a year ago?"
- "Now, looking ahead: Do you think that a year from now you (and your family living there) will be better off financially, or worse off, or just about the same as now?"
- "Now, turning to business conditions in the country as a whole. Do you think that during the next twelve months we'll have good times financially, or bad times, or what?"
- "Looking ahead, which would you say is more likely: that in the country as a whole we'll have continuous good times during the next five years or so, or that we will have periods of widespread unemployment or depression, or what?"
- "About the big things people buy for their homes, such as furniture, a refrigerator, stove, television, and things like that. Generally speaking, do you think now is a good or bad time for people to buy major household items?"
Historically, the surveys have been conducted by phone. Starting in July 2024, they'll be conducted online, with researchers aiming for 900 to 1,000 respondents.
The Conference Board’s Consumer Confidence Index
Conference Board data for October, released on Oct. 28, shows:
- The Conference Board’s Consumer Confidence Index fell 1 point to 94.6, from 95.6 in September.
- The Present Situation Index rose 1.8 points to 129.3.
- The Expectations Index decreased 2.9 points to 71.5.
How the Conference Board’s Consumer Confidence Index comes together
The Conference Board’s Consumer Confidence Survey was launched in 1967 as a mail survey conducted every other month. Today, the survey is conducted online, on a monthly basis, with a sample size of roughly 3,000 respondents.
The Conference Board issues a five-question survey to calculate three distinct indexes: the Consumer Confidence Index, the Present Situation Index and the Expectations Index. Once the surveys have been completed, each question is given a relative value. Then, those values are compared against their relative values from 1985 — the survey’s benchmark year, with an index set at 100.
The Consumer Confidence Index is the average index for all five questions. The Present Situation Index is calculated using the average indexes for the first two questions, and the remaining three questions determine the Expectations Index.
Present Situation Index
- Respondents’ appraisal of current business conditions.
- Respondents’ appraisal of current employment conditions.
Expectations Index
- Respondents’ expectations regarding business conditions six months hence.
- Respondents’ expectations regarding employment conditions six months hence.
- Respondents’ expectations regarding their total family income six months hence.
Consumer Confidence Index
This is the average index for all five questions above.
The Federal Reserve Bank of New York’s Survey of Consumer Expectations
Some highlights for October from the Federal Reserve Bank of New York’s Survey of Consumer Expectations released on Nov. 7 shows:
- Inflation. Median inflation expectations went down by 0.2 percentage point to 3.2% for the one-year ahead horizon, held steady at the three-year horizon and five-year horizon.
- Commodity prices. Year-ahead price expectations decreased for gas (down 0.7 percentage point to 3.5%) and food (down 0.1 percentage point to 5.7%). Price expectations for the year ahead rose for the cost of college (up 1.2 percentage points to 8.2%), medical care (up 0.1 percentage point to 9.4%) and rent (up 0.2 percentage point to 7.2%).
- Home price growth. Median year-ahead home price growth expectations held steady at 3% for the fifth month in a row. Since August 2023, the range has moved between 3% and 3.3%.
- Earnings expectations. Median one-year-ahead expectations for earnings growth went up by 0.2 percentage point to 2.6%.
- Unemployment expectations. The mean probability that the unemployment rate will increase a year from now increased by 1.4 percentage points to 42.5%.
- Probability of job loss. The mean expectation of job loss over the next 12 months went down by 0.9 percentage point to 14% — lower than the trailing 12-month average of 14.2%.
- Probability of quitting. The mean expectation of quitting a job over the next 12 months went down 1.9 percentage points to 18.8%.
- Probability of finding a job if job loss occurs. The mean perceived probability of finding a job over the next 12 months fell 0.6 percentage point to 46.8%, below the 12-month trailing average of 50.6%.
- Household income growth. The median expectation of household income growth went down by 0.1 percentage point to 2.8%.
- Household spending growth. Households expect to spend 4.8% more over the next year, a 0.1 percentage point increase.
- Credit access. Perceptions of credit access improved from a year ago.
How the Federal Reserve Bank of New York conducts its survey
The Federal Reserve Bank of New York’s Survey of Consumer Expectations focuses on expectations about economic outcomes.
The survey, which is conducted by NielsenIQ, launched in 2013. It’s an internet-based survey that asks a rotating panel of 1,300 heads-of-household about their expectations of the economy, as well as their own personal finances related to the following categories:
Inflation:
- Inflation expectations.
- Inflation uncertainty.
- Probability of different inflation outcomes.
- Home price change expectations.
- Home price change uncertainty.
- Commodity price change expectations.
Labor market:
- Earnings growth expectations.
- Earnings growth uncertainty.
- Job separation expectations.
- Job finding expectations.
- Moving expectations.
- Expectations of higher unemployment.
Household finance:
- Household income growth expectations. Household spending growth expectations. Change in taxes. Change in credit availability. Debt delinquency expectations. Expectations of higher interest rate on savings accounts. Household financial situation.Expectations of higher stock prices. Government debt growth expectations.
When do the next consumer sentiment reports come out?
The University of Michigan’s next set of results for its Surveys of Consumers will be released on Friday, Nov. 21.
The Conference Board will release its next Consumer Confidence Survey on Tuesday, Nov. 25.
The New York Fed will release its next Survey of Consumer Expectations on Tuesday, Dec. 8.
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