Both Michigan Sentiment and CB Confidence declined in October.
Figure 1: U.Michigan Economic Sentiment (blue), Conference Board Confidence Index (brown), Gallup Confidence (green), all demeaned and divided by standard deviation 2021M01-2025m02. Red dashed line at “Liberation Day” Source: UMichigan, Gallup, Conference Board, and author’s calculations.
Regarding the demographic characteristics of the responses, I found this the most interesting.
… By income, confidence fell for consumers making less than $75K a year, but improved for most of the income groups making more than $75K, with the largest increase among those earning over $200K. …By partisan affiliation, confidence improved among Independents, declined among Democrats, and was also slightly down among Republicans.
If optimism remains higher among higher income groups, then the likelihood that consumption growth remains positive is higher.
Confidence by higher income people is due to record highs in the stock market. That is all. Higher spending by higher income people is due to record highs in the stock market. That is all.
When there is a stock market correction, that confidence and spending will plummet.
joseph: I don’t disagree.
Consumption changes that may be underestimated:
1. A lot of higher income people have been front running the tariffs and end of EV subsidies. Now they have those items bagged and will be cutting back.
2. A lot of Federal government employees and contractors have been reminded that it is a good thing to have a few month of income saved, just in case.
3. That goes for SNAP recipients too.
4. Trump has suggested that he will not actually pay federal workers for the time they were idle during the shut down. That would rip a serious amount of consumption money out of the economy.
Those are “different this time” items that are not incorporated into the models.
Schumer may be a lot smarter than he is getting credit for. The shut down will likely precipitating a serious economic downturn just at the right time to affect the midterms. Trump thinks he is smart by hurting the poor and government workers until Democrats cry uncle. But he is likely to find that this is hurting GOP midterms a lot more – and some of us democrats are getting tired of people who fail to come out and vote for democrats at the elections.
Not so very off topic – Speaker Johnson says no third presidential term for the felon:
https://www.nytimes.com/2025/10/28/us/politics/johnson-trump-2028-constitution.html
Two things: A) The Speaker would have a role in amending the Constitution, but probably not a decisive one. He is not personally influential enough, nor apparently brave or ethical enough, to prevent the more likely case of the felon-in-chief simply ending our tradition of the peaceful transition of presidential power, as he has tried to do once before. 2) Johnson said he likes it that the felon is bothering liberals with talk of a third term. That’s what the Speaker of the U.S. House of Representatives, third in line for the presidency, thinks is important. Or thinks he needs to say to avoid the wrath of the felon. No budget. No food stamps. No solution for the impending cut to Social Security payments. Scared to allow the House to convene. That’s the Speaker.