With midterms approaching, Americans’ confidence in the economy is in a tailspin

Consumer Confidence Sinks as Midterm Campaigns Intensify

Sandego.net – American consumers are entering the final stretch before the midterm elections with an increasingly grim view of the economy. The University of Michigan’s preliminary consumer sentiment index slipped to 46.3 in October, down from 48.1 in September, placing the measure near the bottom of its 74-year history.

If the preliminary figure is confirmed, it would become the second-lowest reading ever recorded. Only May posted a weaker result, and five of the index’s lowest readings have occurred this year. The result suggests that many households feel more pessimistic today than during periods often associated with major economic and national disruption, including the Vietnam War, the 1970s oil shock, the aftermath of September 11, the Great Recession, the Covid-19 pandemic and the later inflation surge.

The timing is politically significant. Voters’ impressions of everyday financial conditions can shape how they judge the party in power, particularly when campaigns are focused on prices, borrowing costs and household budgets.

“It just underscores how tough people are feeling out there, and it obviously doesn’t particularly bode well for the Republicans as we rapidly approach the midterm elections,” said James Knightley, chief international economist at ING.

Costs and Rates Remain Central to Household Concerns

Recent economic pressures have given consumers plenty to weigh. Gasoline prices have moved higher, inflation has accelerated somewhat and interest rates have begun rising again. Even when broader indicators show continued economic activity, those changes can be highly visible to families making routine decisions about transportation, groceries, housing and major purchases.

Weak sentiment has persisted for years, and frustration over inflation helped fuel voter dissatisfaction in the previous election cycle. The latest reading points to continued concern that the cost of living is becoming harder to manage, especially for people whose financial wellbeing is less connected to gains in the stock market.

The report’s sharpest deterioration came from views of present economic conditions. That component fell 12.2% from September, reaching 44.7, its lowest level on record. Lower-income respondents and people with limited stock-market exposure experienced some of the largest declines.

Joanne Hsu, who directs the university’s Surveys of Consumers, said sentiment among independents dropped enough to outweigh improved readings among respondents identifying as Democrats or Republicans. The political pattern matters because independents can be particularly influential in closely contested elections.

“Frustration over cost-of-living continues to mount, as consumers across the political spectrum believe that the trajectory of the economy has weakened since the beginning of the year,” she said.

Strong Spending Masks an Uneven Economy

The pessimism may seem difficult to square with data showing that the broader economy continues to perform relatively well. Consumer spending has remained an important source of support for growth, but that resilience may be concentrated among households with greater wealth and income.

Knightley points to the so-called K-shaped economy, in which higher-income households continue to spend while many other consumers face more severe financial pressure. Federal Reserve figures show that the top 20% of US households, those earning at least $155,000 annually, hold more than 70% of the country’s wealth and account for 40% of total spending.

That concentration means market performance carries added importance for the outlook. Affluent households with investment gains may be able to maintain spending even as others cut back. But a market downturn could weaken that support at a moment when lower-income consumers are already under strain.

“If the stock markets keep moving along quite nicely, we can keep these trends in play,” he said. “But if we were to see a stock market correction at a time when you’ve still got stress elsewhere, that could really undermine the US growth story.”

Big Purchases Look Increasingly Out of Reach

The survey also raises questions about whether consumers are willing or able to keep making the purchases that drive key areas of the economy. Major household spending decisions are often sensitive to both prices and financing costs, making sentiment an important signal beyond its political implications.

Seventy-three percent of respondents said it was a bad time to purchase a household appliance. The share was 78% for buying a vehicle and 87% for purchasing a home. Such hesitation can affect retailers, automakers, homebuilders and businesses tied to housing activity.

“These are all key drivers of economic activity,” Knightley said.

Expectations for inflation are adding to the unease. Consumers now anticipate prices will rise 4.7% over the coming year, slightly above September’s 4.6% expectation. In February, before the war with Iran contributed to higher gasoline prices, the comparable expectation was 3.4%.

The Federal Reserve closely watches these expectations because they can influence behavior. When people expect persistent price increases, they may accelerate purchases, seek higher wages or change their budgeting decisions. Businesses facing stronger demand and higher labor costs may respond by lifting prices, potentially reinforcing inflation.

The central bank raised interest rates last month for the first time in three years, highlighting the renewed sensitivity to inflation. The next major inflation update will arrive Wednesday with the September Consumer Price Index. Economists expect annual inflation to have climbed to 3.6%, which would be the highest rate in four months.

For consumers, the survey captures a disconnect between headline measures and lived financial experience. A healthy-looking economy may offer little reassurance to households confronting higher fuel costs, expensive credit and uncertainty about whether large purchases are still within reach. As Election Day nears, that gap between economic data and public mood may become one of the most consequential forces in the political debate.