Consumer Sentiment Sinks Deeper Than Expected
By Goldsea Staff with Reporting by Reuters | 07 Nov, 2025

The dawning realization that Trump is determined to continue his disruptive policies that favor the wealthy over the working class appears to have contributed to the pessimism triggered by Trump's tariff war and migrant deportations.

Consumer sentiment darkened far more than expected, plunging to 50.3 in November from 53.6 in October, according to the latest University of Michigan survey.  That brings the mood down very close to the darkest days of 2022 amid the massive disruptions caused by the lingering Covid lockdown in China that had strained global supply chains.

Ironically, even with Covid mostly receding in the distance, the current low sentiment can also be traced to supply chain disruptions causing elevated prices.  Instead of Covid. however, the current disruptions are due entirely to massive tariffs Trump unveiled earlier this year with misguided notions of fixing the US trade deficit which had been a fixture of the sustained half-century growth of the US and global economy.

Analysts had expected sentiment to fall to 53.0 even factoring in the elevated inflation and the extended government shutdown.  

The current dark mood is likely compounded by the growing awareness that Trump has no intention of ending his aggressively disruptive trade and immigrant policies which too have added to food, construction and healthcare costs.

The survey confirmed what economists describe as a K-shaped economy, where the higher-income households are doing well and lower-income consumers are struggling. Sentiment increased among consumers with large stock holdings, which the University of Michigan attributed to "continued strength in stock markets." 

The K-shaped economy was also evident in a Conference Board survey last week.

"Shutdowns generally have only moderate economic impacts, given their typically brief nature and the economy bouncing back when the government reopens," said Daniel Hornung, policy fellow at the Stanford Institute for Economic Policy Research. "But ... (this is) a warning sign that this kind of prolonged shutdown could lead to more meaningful economic weakness."

Interviews for the survey were concluded before the first set of major elections since President Donald Trump returned to the White House. Trump's fellow Republicans performed poorly against Democrats. 

The decline in sentiment occurred among consumers who described themselves as Democrats, Republicans and independents and was spread across all age and income groups, with the exception of those with the largest tercile of stock holdings.

SHUTDOWN DISRUPTS FOOD STAMP PAYMENTS

"With the federal government shutdown dragging on for over a month, consumers are now expressing worries about potential negative consequences for the economy," Joanne Hsu, the director of the Surveys of Consumers, said in a statement.

The government shutdown, now in its second month, has led to cuts in benefits, including food stamps, for millions of lower-income households. Hundreds of thousands of federal workers have been furloughed and others are working without pay, while travelers are facing delays at airports as flights are grounded.

The deterioration in sentiment would suggest weak consumer spending, the economy's main engine, but the correlation between consumer sentiment and spending is weak.

Economists also point out that spending is mostly being driven by higher-income households, as lower-income households are bearing most of the brunt of a sluggish labor market and higher prices from tariffs on imports.

"The top 20% of households by income drive 40% of consumer spending, and we think the wealth effect from the buoyant stock market has strengthened this year," said Michael Pearce, deputy chief U.S. economist at Oxford Economics. "We also think that reflects the increasing bifurcation of the U.S. consumer."

The survey's measure of consumer expectations for inflation over the next year increased to 4.7% this month from 4.6% in October. Consumers' expectations for inflation over the next five years eased to a still-high 3.6% from 3.9% last month.

The Federal Reserve last week cut its benchmark overnight interest rate by another 25 basis points to the 3.75%-4.00% range, and Fed Chair Jerome Powell said "a further reduction in the policy rate at the December meeting is not a foregone conclusion."

(Reporting by Lucia Mutikani; Editing by Paul Simao)