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13 October 2026
With the US midterms only three weeks away, the economy is becoming a defining political issue. The University of Michigan’s preliminary October survey puts consumer sentiment at 46.3, down 3.7%mom and 13.6%yoy. More strikingly, its Current Economic Conditions Index plunged 12.2% to 44.7, a record low. The headline reading is also approaching May’s all-time low of 44.8. The figures capture a widening disconnect between economic activity and how households experience it.
The deterioration is not simply about slower growth. It reflects the cumulative burden of higher prices, expensive borrowing and renewed energy costs. Inflation may rise or fall from month to month, but lower inflation does not mean prices return to previous levels. Households are still paying more for everyday essentials, while elevated mortgage rates and housing costs make financial progress harder. Recent US data suggest real wage growth has weakened, compounding the squeeze on purchasing power.
There is also a growing divide between those benefiting from rising asset prices and those relying primarily on earned income. Strong equity markets and technology investment have supported aggregate wealth and consumer spending, but those gains are unevenly distributed. Households with substantial investments may feel more secure; those with limited savings have less protection against higher fuel bills, food prices and borrowing costs. This helps explain how spending can remain resilient even as consumer confidence approaches historic lows.
Inflation expectations add another complication. One-year expectations rose from 4.6% to 4.7%, while five-year expectations increased from 3.4% to 3.5%. Both are above their respective ranges in 2024. These are survey expectations, not forecasts of actual inflation, but persistently elevated readings matter because they can influence spending decisions and complicate the Fed’s task. With energy costs rising amid the Iran conflict, policymakers face the risk of renewed inflation pressure just as households are expressing deep dissatisfaction with current conditions.
The political implications are significant, particularly as independent voters become an increasingly important force in US politics. Gallup found that a record 45% of US adults identified as political independents in 2025, making them the largest group by political affiliation. Their influence is especially pronounced in closely contested races, where relatively small shifts in support or turnout can prove decisive. The latest University of Michigan survey adds to the challenge for incumbents: sentiment among independents deteriorated further in October, even as it improved among Republicans and Democrats. While this does not necessarily translate into a change in voting intentions, it suggests that economic dissatisfaction is extending beyond traditional party loyalties.
More concerning is the possibility that weak sentiment reflects a deeper and more persistent erosion of confidence, rather than a temporary reaction to one month’s data. If household purchasing power remains under pressure while asset price gains disproportionately benefit wealthier Americans, robust headline growth may do little to improve how the economy feels for many voters. As the midterms approach, the question is no longer simply whether the US economy is growing, but who is benefiting from that growth, and whether the gains are reaching the households whose votes could prove decisive.