US consumer sentiment unexpectedly jumps to 51 despite AI bubble fears

The University of Michigan's preliminary consumer sentiment index rose to 51 in November from 48 in October, a three-month high against a Bloomberg consensus that expected no change from October's reading.

The gain showed up in both components: current conditions printed at 51.0 against an expected 47.0, and expectations at 50.9 against 49.0. Assessments of buying conditions for durable goods rebounded from a record low, and the survey of current personal finances climbed to a four-month high. But the improvement was not evenly shared. It was concentrated among independents, who reported their strongest sentiment in more than a year, while self-identified Democrats and Republicans both deteriorated in the days before the midterm election. The fieldwork ran from October 20 to November 2, so the reading captures the electorate's mood going into the vote — not the vote itself, and not the equity sell-off that followed it.

The relief is relative. Fifty-seven percent of respondents spontaneously mentioned that high prices had eroded their living standards, the highest share since May, and the overall index remains just shy of the lowest prints ever recorded — set both a few months ago and during the early 1980s. The economy has produced limited layoffs and strong growth, but prices have risen faster than wages for years, and the Democratic sweep of this week's midterms was read in part as a verdict on the cost of food, gasoline and housing.

Inflation expectations eased: consumers see prices rising 4.3 percent over the next year, down from 4.7 and below the 4.6 percent economists expected, with the five-to-ten-year measure down at 3.4 percent.

The sharpest division in the data runs through wealth rather than party. Survey director Joanne Hsu said consumers' comments revealed growing anxiety over a possible AI bubble, and the portfolio effect is visible in the numbers: the personal finances of consumers with the largest stock holdings dropped 12 percent this month to their lowest reading since April, which Hsu attributed to recent agitation in stock values. Every other wealth group reported modest improvement.

The result is two economies in one index. Households that own the market are marking their finances down as it falls; households that do not are marking theirs up, on the strength of paycheques and grocery bills rather than data centres.

The survey closed on November 2. Neither the election result nor the sell-off is in the numbers yet.