The Impact of the U.S. Federal Government Shutdown on Consumer Confidence
The recent U.S. federal government shutdown has diverted attention from employment data, prompting investors and analysts to focus on alternative economic indicators less reliant on government sources. One such indicator is the University of Michigan Consumer Sentiment Index, which gauges consumer confidence through monthly surveys on personal finances, business conditions, and economic expectations.
University of Michigan Consumer Sentiment Index: A Closer Look
The latest report for November revealed a decline to 50.3, down from October’s 53.6, signaling a loss of confidence. This figure is nearly equal to the low reached in June 2022 during the pandemic, and it’s the second-lowest recorded by the index. The drop can be primarily attributed to the federal government shutdown, persistent high inflation according to the central bank, slowing job creation, and crackdowns on foreign workers.
Stock Market Performance: A Reflection of Investor Confidence
Another key indicator is the stock market, which mirrors investor sentiment. Recently, the market has been driven by advancements in artificial intelligence, particularly among the “Seven Magnificent” companies: Amazon, Alphabet (Google), Apple, Meta (Facebook), Microsoft, Nvidia, and Tesla.
However, the previous week saw the NASDAQ Composite Index experience its worst performance since April’s tariff imposition by the White House. Some observers predict an eventual market correction, while others describe the surge as a bubble. As former Federal Reserve Chairman Alan Greenspan once noted, bubbles can only be identified after they burst.
Who is the Author?
*International analyst and consultant, former director of CEPAL’s office in Washington. Economic and financial commentator for CNN en Español TV and radio, TELEMUNDO, UNIVISION, and other media outlets.
Key Questions and Answers
- What is the University of Michigan Consumer Sentiment Index? It’s a monthly survey measuring consumer confidence based on personal finances, business conditions, and economic expectations.
- Why has consumer confidence dropped in November? The decline is mainly due to the federal government shutdown, ongoing high inflation, slow job creation, and increased enforcement against foreign workers.
- How has the stock market performed recently? The stock market has been influenced by advancements in artificial intelligence, with the “Seven Magnificent” companies—Amazon, Alphabet (Google), Apple, Meta (Facebook), Microsoft, Nvidia, and Tesla—driving the market. However, the NASDAQ Composite Index experienced its worst performance since April due to tariff impositions by the White House.
- What are people saying about the current market conditions? Some observers predict a market correction, while others describe the surge as a bubble, reminiscent of Alan Greenspan’s observation that bubbles can only be identified after they burst.
