Consumer sentiment fell back a modest 2.5 index points, or 4%, in November, extending what is now a four-month stretch of consecutive declines, according to the University of Michigan Surveys of Consumers.

While consumers’ views of their personal finances improved, their economic outlook deteriorated, due in part to growing concerns about high interest rates, ongoing wars in Gaza and Ukraine, and election uncertainty, according to chief economist Joanne Hsu, director of the surveys.

“The current mood reflects a balance of factors, some of which improved while others worsened this month,” Hsu said. “Consumers observed easing inflation and gas prices, which gave them an increased sense of security over their personal finances.

“However, they are not confident that positive developments with inflation will continue. With considerable uncertainty amid wars in the Middle East and Ukraine, as well as a U.S. election less than a year from now, consumers are concerned about the various ways the economy could take a turn for the worse.”

Personal finances strengthen, even as consumers expect inflation to worsen

Assessments of personal finances rose 6% and are now 9% more favorable than a year ago, primarily on the basis of easing price pressures. For those with the top tercile of stock holdings, personal finances improved a notably steep 22% this month, reflecting recent strengthening in equity markets, Hsu said.

Among all consumers, expectations of future personal finances rose about 5% from last month and is equal to its reading from a year ago. Consumers have taken note of the continued slowdown in inflation; the share of consumers blaming high prices for eroding their living standards fell from 47% in October to 40% this month.

“At this time, however, consumers appear worried that the softening trend in inflation could reverse in the months and years ahead,” Hsu said.

High interest rates weigh down buying conditions

Homebuying conditions plummeted 23% this month, reaching just one point above last November’s all-time low. Buying conditions for large durable goods plunged 10%. For vehicles, buying conditions reached their worst since December 2022. High interest rates are a major factor for all three types of purchases, Hsu said.

About 34% of consumers spontaneously blamed high interest rates or tight credit for poor buying conditions for vehicles; this is the highest share on record. Likewise, the share of consumers blaming interest rate factors for poor home and car buying conditions are both at their highest since the early 1980s.

Given that 55% of consumers expect interest rates to continue rising in the year ahead with an additional 32% expecting rates to remain unchanged, these concerns are unlikely to abate anytime soon, Hsu said.

Consumer Sentiment Index

The Consumer Sentiment Index fell to 61.3 in the November 2023 survey, down from 63.8 in October and above last November’s 56.7. The Current Index fell to 68.3, down from 70.6 in October and above last November’s 58.7. The Expectations Index fell to 56.8, down from 59.3 in October and above last November’s 55.5.

About the surveys

The Surveys of Consumers is a rotating panel survey at the University of Michigan Institute for Social Research. It is based on a nationally representative sample that gives each household in the coterminous U.S. an equal probability of being selected. Interviews are conducted throughout the month by phone. The minimum monthly change required for significance at the 95% level in the Sentiment Index is 4.8 points; for the Current and Expectations Index, the minimum is 6 points.