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With the federal government shutdown now spanning two weeks, there has been a dearth of economic data as the agencies that produce them are shut down.

But there are alternative sources of economic data from non-governmental organizations that help fill the void, like the University of Michigan’s monthly Surveys of Consumers.

The Surveys of Consumers has long been a trusted source for consumer sentiment, but now its importance is magnified amid the shutdown.

The October report shows that consumers remain pessimistic as the overall Index of Consumer Sentiment ticked down to 55.0 from 55.1 in September. It is the lowest score since April and May when the overall index was at 52.2 in each of those months. By comparison, the overall index was 70.4 in October 2024.

The index is comprised of two parts, the Index of Current Economic Conditions and the Index of Consumer Expectations. Both are self-explanatory, gauging sentiment right now and in the near future.

The Index of Current Economic Conditions improved slightly to 61.0 in October, from 60.4 in September, but it is down from 64.9 a year ago.

However, the Index of Consumer Expectations sank to 51.2, down from 51.7 last month. That is the lowest since it hit 47.9 in May. Last October, the expectations index was at 74.1.

Inflation and weakening job market weigh on consumers

Joanne Hsu, director of the Surveys of Consumers, said high prices and weakening job prospects account for the waning sentiment.

“At this time, consumers do not expect meaningful improvement in these factors. Meanwhile, interviews reveal little evidence that the ongoing federal government shutdown has moved consumers’ views of the economy thus far,” Hsu said.

Inflation expectations for the year ahead are 4.6%, which is down from 4.7% last month. Over the longer term, consumers expect inflation to be 3.7%, which is the same as last month. Inflation expectations are higher than they were a year ago, but down from highs in April and May following the tariff announcements.

Chris Zaccarelli, chief investment officer for Northlight Asset Management, noted that the overall index score was higher than the 53.5 that was projected by economists.  

“However, in absolute terms, the numbers are still low – only 55, and at the lower end of the range over the life of the survey,” Zaccarelli said. But he’s confident that it won’t drag down stocks.

We believe the seasonal weakness will pass and once the government re-opens and earnings season kicks off in earnest, we will see a resumption of the rally that we have seen all year; the death of this bull market has been greatly exaggerated,” Zaccarelli said.

Stocks were down big on Friday, with the Dow Jones Industrial Average off about 530 points and the S&P 500 down 110 points.

The Nasdaq Composite was the biggest loser, down 513 points or 2.2% on Friday afternoon while the Russell 2000 index dropped 51 points or 2.0%.

More trade war saber rattling between the U.S. and China caused the selloff.

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