Why American Consumers Are Still Worried About Inflation Despite Improving Economic Sentiment in November 2026

Two things are true at once in November 2026. The University of Michigan's preliminary survey shows consumer sentiment rose 6.3 percent to 51.0, the highest reading since August, and year-ahead inflation expectations fell to 4.3 percent from 4.7 percent. And in the same survey, 57 percent of consumers spontaneously said high prices have eroded their living standards, the highest share since May and up from 46 percent in February, before the Iran conflict.

That combination looks like a contradiction. It is not. Sentiment measures direction, whether things are getting better or worse. Living standards measure level, whether a paycheck covers what it used to. Both can move in opposite directions for months, and the survey data shows exactly that. This report walks through what the November numbers actually say, where the pressure sits in household budgets, and what the evidence suggests about the holiday shopping season now under way.

What the November survey actually found

The improvement is real but narrow. Survey director Joanne Hsu said the gains were concentrated primarily among political independents, whose sentiment jumped almost ten points, and among lower- and middle-wealth consumers. Sentiment fell 5 percent for those with the largest stock portfolios after a turbulent stretch in equity markets, and Hsu noted growing anxiety over a possible AI bubble, though she said those worries were dwarfed by cost-of-living concerns across the population.

Context matters more than the monthly move. Sentiment remains 10 percent below February, before the Iran conflict began, and is only flat against a year ago. Advisor Perspectives notes the index sits in the first percentile of its own history. A bounce off a historically low floor is not a recovery to normal.

The timing caveat is significant. Interviews ran from October 20 to November 2, closing before the midterm election results and before the AI-related stock selloff that followed. Econ Data Tools is explicit that the preliminary results should not be read as a response to events after interviewing ended. The final November reading, due later this month, will capture more of that.

Inflation expectations fell, but they have not normalized

Year-ahead expectations of 4.3 percent are the lowest since August, and long-run expectations eased to 3.4 percent from 3.5 percent. Both moves are in the right direction. Neither is back to normal. The University of Michigan notes that long-run expectations remain above the 2.8 to 3.2 percent range recorded throughout 2024, and year-ahead expectations remain above February's 3.4 percent.

Expectations matter because they feed behaviour. Households that expect 4 percent inflation negotiate pay, delay purchases and stock up differently than households that expect 2 percent. The survey's own research programme, including an October paper on risks of entrenchment in long-run inflation expectations, reflects how seriously economists take the possibility that elevated expectations persist even as actual inflation cools.

And actual inflation has not fully cooled. As we documented in our cost of living report, the Consumer Price Index rose 3.7 percent in the year to September, with gasoline up 34.2 percent and fuel oil up 74.2 percent. Expectations of 4.3 percent are, in that context, roughly consistent with what households have just lived through.

Groceries and housing: the two bills that shape the mood

Grocery prices rose only 1.8 percent in the year to September, and fell slightly in the month. By any recent standard that is mild. But the index measures change, not level. Prices that jumped in 2021 and 2022 never came back down; they stopped rising as fast. A family comparing this week's receipt to what the same cart cost four years ago is experiencing a cumulative increase the annual figure does not show. The Conference Board's confidence survey, which Yahoo Finance reported hit its lowest level since 2014, found consumers specifically frustrated with the high cost of food and groceries alongside gas prices.

Housing works the same way with larger numbers. The shelter index rose 3.2 percent over the year, a slower pace than 2022 or 2023. But the national median existing home price reached 432,900 dollars in the third quarter, according to the National Association of Realtors, and the average 30-year mortgage rate sat near 7.4 percent in mid October. Eighty-five percent of Michigan respondents said it was a bad time to buy a house. Renters face their own version: Harvard's Joint Center for Housing Studies reported cost burdens at another record high in its 2026 report, and asking rents rose year over year in October for the first time in three years.

These are not marginal line items. Housing and food are the two largest non-discretionary categories in most budgets, and both are priced at levels that feel permanent. That is the mechanical explanation for why 57 percent of people say their living standards eroded even as the monthly indicators improve.

Household finances under the surface

The debt data shows a household sector that is coping, but with less margin. The New York Fed's household debt report for the third quarter is released today, November 10. The second quarter report put total household debt at 18.771 trillion dollars, credit card balances at 1.263 trillion, and the share of card balances moving into serious delinquency at 6.97 percent, slightly above a year earlier.

The New York Fed's own researchers have cautioned against reading the worst headline number at face value. An August Liberty Street Economics analysis found that the stock of credit card balances 90 or more days delinquent rose from 7.6 percent to 12.8 percent between late 2022 and early 2026, but that the flow of new delinquencies has been stable for almost two years. The rising stock reflects old charged-off debts lingering on credit reports, not a fresh wave of missed payments. The accompanying research post for today's report examines newly delinquent card borrowers and how their profile has changed, which suggests where the Fed's analysts see the real risk.

Survey evidence points the same direction. Pew Research Center found four in ten Americans had trouble affording basic necessities, and McKinsey's consumer research found one in four feeling pessimistic about economic conditions. Financial pressure is not evenly distributed: it concentrates in lower-income households, renters, small-firm employees paying more for health coverage, and anyone financing a car or home at current rates.

How spending habits are changing

The behavioural shifts documented across these sources are consistent. Households are delaying large purchases: buying conditions for durable goods plunged 18 percent in October in the Michigan survey, and pending home sales fell to the lowest reading since the index began in 2001. People are staying put rather than moving, which suppresses spending on everything that comes with a move. Insurance buyers are trading lower premiums for higher deductibles, a quiet transfer of risk back onto households.

What consumers are not doing, in aggregate, is stopping spending. That is the other half of the apparent contradiction, and it sets up the holiday season.

The holiday season: record dollars, cautious shoppers

The National Retail Federation forecasts November and December retail sales of 1.013 trillion dollars, up 4.2 percent over last year and the first time the season would cross a trillion. NRF chief economist Mark Mathews said consumers remain the bright spot in the economy, while cautioning that inflation, gas prices and household budget pressure will affect income groups differently.

Two details inside the forecast deserve attention. First, Retail Dive reports that NRF expects nearly half of the nominal growth to come from real spending, meaning the rest is price increases. A record dollar figure is partly a record price tag. Second, NRF noted higher diesel and memory-chip prices pressuring popular gift categories like electronics, and Mathews said he expects goods prices to run below headline inflation because retailers are responding to a price-conscious consumer. Last year's forecast missed: NRF predicted 3.7 to 4.2 percent growth and the season delivered 3.1 percent.

The shopper surveys describe a deliberate consumer. NRF's holiday data shows 43 percent of shoppers starting before November, 56 percent saying the state of the economy will affect their plans, and gift cards, at 47 percent, the most wanted item, a choice that lets recipients hunt for value themselves. Seven in ten consumers told surveyors that lower prices would make shopping easier, and affording the holidays ranked as the top seasonal stressor.

Seasonal hiring tells the same story from the employer side. NRF expects retailers to add 325,000 to 375,000 seasonal workers, roughly flat with last year's 356,000, with the federation citing caution about gas prices, inflation, interest rates and consumer debt.

What could actually happen

The evidence supports three plausible shapes for the season. The base case, matching the NRF forecast, is a record in nominal dollars with flat-to-modest real volume: shoppers show up, spend deliberately, trade down within categories and lean on promotions. The downside case is an energy-driven squeeze: if gasoline stays elevated through December, lower-income households cut discretionary gifts first, and the mid-tier retailers that Pacer.ai data cited by Yahoo Finance shows already losing traffic absorb the damage while value chains and luxury hold up. The upside case depends on the stock market: if the AI-related selloff stabilizes, the wealth effect that lifted spending among higher-income households all year continues to carry the aggregate number.

What the data does not support is a consumer on the verge of either collapse or exuberance. Sentiment is improving off a historically low floor, expectations are easing but not normal, debt stress is concentrated rather than broad, and spending plans are intact but value-driven. The worry and the resilience are the same fact seen from two angles: households have adapted to a more expensive economy without feeling better about it.

Limitations

This is an analysis of published surveys and forecasts, not original consumer research. The Michigan figures are preliminary and were collected before the midterm results and the subsequent market selloff; the final reading may differ. The NRF forecast is a trade group's model and missed high last year. The Conference Board, Pew and McKinsey findings are reported here through secondary coverage, not the primary releases. The New York Fed's third quarter debt report is released today and was not available at writing; second quarter figures are used instead. Sentiment surveys measure feelings, which predict spending imperfectly, and none of the cited sources can separate how much of holiday spending growth will be prices rather than volume.