US consumer sentiment falls to lowest level in 3 years amidst continued government shutdown

The University of Michigan US consumer sentiment survey showed that US consumer sentiment index for November fell to the lowest level in more than 3 years. The index came at 50.3 in November. In October it was 53.6. The decline was much sharper than expected. The survey also revealed that US economy is currently in a K-shape. A K-shaped economy is that where the affluent segment is doing well while those in the lower income and poor segment are doing poorly.

Current government shutdown is now the longest in US history

The main cause in the decline in consumer sentiment in November is the prolonged government shutdown. The current government shutdown has now extended to over a month. It is the longest government shutdown in the history of United States. There is no sign of the shutdown getting ended anytime soon. Both the Republicans and Democrats are holding on to their guns. The Democrats are not ready to get any government spending bill passed that reduces budget for Medicaid. The current bill that has caused the shutdown proposes 15% cut in Medicaid.

Flights already getting disrupted in big way because of shutdown

The government shutdown has resulted in suspension of welfare payments such as those for food stamps to the poorest segment of the economy. It has also caused major disruptions in flights in US. This because of shortage of air traffic controllers and flight staff. Thousands of Federal employees have been sent on furlough as the federal government does not have money to pay their salaries as the shutdown continues. A number of air traffic controllers and airport staff are also working without pay.

US Transport Secretary, Sean Duffy said yesterday that as many as 20% of flights in US can be cancelled by Thanksgiving day if the government shut down continues. US Thanksgiving Day is falling on 27^th November this year. The longer duration of the shutdown has also raised concerns that it may have a permanent impact in reducing US GDP or GDP growth in FY26.

Source : University of Michigan Consumer Sentiment Survey

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