Consumer Sentiment Declines Amid Cost of Living Concerns; Government Shutdown Has Minimal Impact

Consumer sentiment in the United States has declined, driven by concerns over the rising cost of living and a weakening job market. The University of Michigan's preliminary reading for October registered at 55, marking one of the lowest levels since records began in 1952. Joanne Hsu, the survey's director, noted that "pocketbook issues like high prices and weakening job prospects remain at the forefront of consumers' minds," adding that "consumers do not expect meaningful improvement in these factors."

Despite the federal government shutdown, which began on October 1, 2025, and has resulted in over a million federal workers being furloughed or working without pay, the survey indicates that this has not significantly influenced Americans' economic perceptions. Hsu stated, "Interviews reveal little evidence that the ongoing federal government shutdown has moved consumers' views of the economy thus far."

Economists suggest that while the macroeconomic effects of the shutdown are currently limited, they could become more pronounced the longer it continues. The next Senate vote to fund the government is scheduled for Tuesday, though Congress appears to remain deadlocked.

Although consumer sentiment has been weak, this has not necessarily translated into reduced spending. Retail sales increased in August for the third consecutive month, rising 0.6% from the prior month, according to Commerce Department data. Economists attribute this resilience to the relatively solid labor market, with unemployment remaining low. Oren Klachkin, financial market economist at Nationwide, observed that "many of the themes from September carried into October with the tough job market not inspiring confidence alongside persistent cost-of-living and high interest rate concerns."

However, the shutdown has led to the suspension of crucial economic statistics, including the monthly jobs report, which was scheduled for October 3. Alternative data from private companies and Federal Reserve regional banks indicate that the labor market continued to slow last month.