Only 31% of Consumers Expect to Spend as Usual as Weak Wage Growth, High Gas Prices Take Toll

That's according to the latest University of Michigan consumer survey, the last before the mid-term elections. It shows that while most consumers remain under pressure from weak wage growth, high motor fuel costs and worries about job security – a fact reflected in consumer surveys – spending is holding up, owing to the growing dominance of high-income households.

The University of Michigan consumer sentiment survey was very weak, falling to 46.3 in October from 48.1. James Knightly, chief international economist, U.S., for ING, notes this is the second-weakest reading of all time (the weakest being in May of this year).

Current conditions exhibited the greater pain, falling to 44.7 from 50.9, which is a new low and doesn't bode well for Republicans in the mid-terms. High gasoline prices, weak income growth and job security all remain the key themes with steep falls seen in all the "good time to buy..." categories. 73% think it is a bad time to buy a major household appliance, 78% think it is a bad time to buy a vehicle and 87% think it is a bad time to buy a home."

Knightley notes that "the relationship between spending and sentiment has broken down over the past couple of years, primarily because of the K-shaped consumer story.

"High-income households are the key driver of spending behaviour, with the Bureau of Labor Statistics suggesting the top 20% of households by income (those making over $155k per year) are responsible for around 40% of all consumer spending, while Moody's Analytics suggest it could be as much as 60%. This group has high-paying jobs, a greater sense of job security and has been boosted by huge wealth gains over recent years," he explains.

Meanwhile, the median American (reflected in the sentiment surveys) doesn't have the wealth gains to support their spending in an environment where real household disposable incomes are barely growing in a low-hire, low-fire economy – Federal Reserve data suggests the bottom 60% of households by income hold only 15% of US household wealth.

We think this explains what you see in the alcohol beverage business: Wineries filing for Bankrupcy Act protection, creditors seeking receivership and liquidations of wineries and craft breweries, even those that have been in business for decades, and the reason seven major distilleries filed for bankruptcy in 2025.

"As long as equity markets hold up," Knighley says, spending can keep going. But if we were to experience a stock market correction, the situation would change very quickly."

Footnote: I attended a conference in Owings Mills, a Baltimore suburb, on Saturday. After it ended, I got into a conversation with a security guard, who, without any prompting told me he was a Republican, former military, a retired Baltimore police officer. He voted for President Trump, and he said he deeply regrets it. He then let fly with a tirade about the many ways the president has betrayed the country and its allies, and is bankrupting the nation. "I feel sorry for my grandchildren," he said as he told me he was 80 years old.

And then he turned to Trump's deal with Russia's President Putin in which Putin has agreed to supply diesel fuel to the global marketplace in exchange for the U.S. allowing Russia to sell diesel to the U.S. and other countries until April. The deal with provide Putin with U.S. dollars to buy additional munitions to use against Ukraine, something the security guard said he just couldn't understand. "Russia is not our friend," he added.

One conversation is not enough from which to draw any conclusions. But I share it because the error those of us in the media made in 2016 was to not report what people outside the political classes on the coasts thought.