Consumer Sentiment Collapses to Near-Historic Lows Amid Record Government Shutdown

This analysis is based on the CNBC report [1] published on November 7, 2025, which revealed that consumer sentiment has collapsed to near-historic lows amid the longest government shutdown in U.S. history. The University of Michigan’s Index of Consumer Sentiment fell to 50.3 in November 2025, marking its lowest level in more than three years and just off the worst reading ever recorded [1]. This represents a significant 6.2% decline from October’s 53.6 reading and approximately 30% drop year-over-year, substantially missing economists’ expectations of 53.0 [1].

The timing of this sentiment collapse is particularly critical as it coincides with the U.S. government shutdown entering its 36th day, making it the longest shutdown in American history [2]. Unlike previous shutdowns that affected only portions of government spending, this current shutdown impacts 100% of appropriations versus just 10% in the previous 35-day record from 2018-2019 [2]. The comprehensive scope and unprecedented duration are creating cascading economic disruptions across multiple sectors.

Market reaction reflected the severity of the situation, with major indices showing weakness: S&P 500 declined 0.40% to 6,669.09, NASDAQ Composite fell 0.71% to 22,730.99, and Dow Jones Industrial Average was slightly down 0.05% to 46,775.34 [0]. Sector performance revealed clear divergence, with Consumer Cyclical stocks declining 0.51% and Technology stocks falling 1.31%, while Consumer Defensive sectors gained 0.77% as investors sought safety amid uncertainty [0].

The survey revealed troubling specifics across both current and future economic conditions. The Current Conditions Index slid to 52.3, representing an 11% month-over-month decline and 18.2% year-over-year drop, while Future Expectations fell to 49.0, down 2.6% month-over-month and 36.3% year-over-year [1]. Despite these declines, inflation expectations showed some moderation with the 1-year outlook at 4.7% and 5-year at 3.6% [1].

: The current shutdown’s unprecedented duration and comprehensive scope are creating multiplier effects beyond typical economic disruptions. With 730,000 federal workers furloughed without pay and 670,000 working without paychecks [2], the direct financial impact is compounded by reduced consumer spending power across the economy. The Congressional Budget Office estimates $7-14 billion in permanent economic losses from this shutdown [2].

: The shutdown is causing cascading failures in essential services. The FAA has ordered flight reductions starting at 4% and escalating to 10% by November 14 [3], potentially disrupting the crucial Thanksgiving travel period. Additionally, SNAP benefits have been suspended for over 40 million people [4], creating immediate food security concerns and reducing retail grocery spending.

: Notably, the survey revealed a significant disparity in sentiment based on wealth distribution. Those with the largest stock holdings showed an 11% improvement in sentiment [1], suggesting that market gains are not translating to broad-based economic confidence. This disconnect highlights growing economic inequality and the uneven impact of the shutdown across different demographic groups.

: With government data collection suspended, private surveys like the University of Michigan’s index have become crucial economic indicators [1]. This creates information uncertainty that could impair monetary policy decisions and market forecasting, potentially amplifying volatility as investors struggle to assess economic conditions accurately.

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: The timing of this sentiment collapse poses severe risks to the critical Q4 retail period. With consumer confidence at historic lows entering the holiday shopping season, discretionary spending could collapse, potentially leading to significant earnings misses for retail companies and broader economic contraction.

: The FAA-mandated flight reductions [3] combined with federal worker furloughs could severely impact Thanksgiving travel, one of the busiest travel periods of the year. This could create cascading effects across hospitality, tourism, and related service industries.

: Extended periods without pay for hundreds of thousands of federal workers increases the risk of loan defaults and financial strain across the banking sector, particularly for institutions with high concentrations of government employee customers.

: The analysis reveals several structural concerns that warrant careful consideration. The combination of high baseline inflation, elevated interest rates, and comprehensive government shutdown creates a perfect storm that could trigger broader economic recession if the impasse continues.

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Decision-makers should closely track congressional negotiations for any progress toward budget resolution, Federal Reserve responses to counter shutdown effects, corporate earnings guidance revisions for Q4, and alternative consumer spending measures given suspended government reports [1].

The University of Michigan’s Consumer Sentiment Index has fallen to 50.3 in November 2025, its lowest level in over three years, driven by the longest government shutdown in U.S. history [1]. The shutdown, now in its 36th day, affects 100% of government appropriations and has already caused significant economic disruptions including flight reductions, suspension of SNAP benefits for 40+ million people, and furloughs affecting 1.4 million federal workers [2, 3, 4].

Market reaction showed sectoral divergence, with defensive sectors outperforming while consumer cyclical and technology stocks declined [0]. The survey revealed that sentiment fell across all demographic groups except those with significant stock holdings, highlighting growing economic inequality [1]. Current Conditions Index declined 11% month-over-month while Future Expectations fell 2.6%, though inflation expectations showed some moderation at 4.7% for one year and 3.6% for five years [1].

The unprecedented scope and duration of this shutdown create unique risks compared to historical precedents, particularly as it coincides with the critical holiday shopping season and Thanksgiving travel period. With government economic data suspended, private indicators have become essential for monitoring economic conditions [1].