Morgan Stanley: US consumer confidence edges up as daily AI use hits a new high

How much did consumer confidence improve?

Morgan Stanley surveyed about 2000 US consumers from 22 October to the 26th. For economic conditions over the next six months, 31% expect an improvement and 47% expect deterioration; the difference is -16%, up from -23% last month, but more people remain pessimistic.
Household finance expectations are more resilient: 44% expect an improvement over the next six months and 24% expect deterioration, yielding a net reading of +20%, above +18% last month and +6% a year ago.
Inflation remains the top concern across income groups: 62% of respondents mentioned it, close to 63% last month but above 53% in January. The share worried about being unable to pay rent or a mortgage rose from 23% in the previous survey to 26%.

Of respondents, 38% expect spending to increase next month and 13% expect it to decrease, yielding a net reading of +25%, above +23% last month, +13% a year ago and the survey average of +16%.
Spending intentions remain tilted toward necessities. Net expectations for spending on computers and accessories next month stand at -9%; although net expectations for toy spending over the next six months improved from -19% a year ago to -4%, slightly more people still plan to reduce spending.
Actual consumption is also resilient: real consumption grew 2.5% year over year in the third quarter of 2026, above 2.1% in the previous year. Morgan Stanley believes that 12% year-over-year growth in household wealth and higher tax refunds earlier in the year helped consumers cope with weak real income growth and rising oil prices in spring and summer.

Morgan Stanley’s base case assumes that cuts to the SNAP food assistance program and Medicaid are implemented as planned, and expects them to reduce real consumption growth in 2027 by 0.2 percentage points. Taking affordability pressures and tighter financial conditions together, the bank expects real consumption growth to fall from 2.5% in 2026 to 2.0% in 2027, both measured year over year in the fourth quarter.
The policy impact is more concentrated among lower-income households: SNAP and Medicaid account for about 4% of pretax income across all households, but more than 30% of income for households in the lowest-income quintile. The bank therefore expects consumption divergence to persist in the near term.
If Democrats control both houses of Congress with sufficiently large majorities, Morgan Stanley believes some provisions could be delayed; targeted delays would raise its 2027 consumption growth forecast by 0.1 percentage points, while a comprehensive delay or scaling back of the cuts could raise it by 0.4 percentage points.

Of respondents, 27% use AI daily for personal matters, up from 19% in January; among employed adults, the share using AI daily for work rose from 20% to 30%. In the workplace, 71% of white-collar workers and 45% of blue-collar workers use it at least weekly.
Over the past month, 46% of consumers used AI to learn about or research new topics, up from 38% in January but slightly below 48% in the previous survey. Among employed respondents who use AI for work tasks, 64% use it for writing, editing and text summaries, and 60% for research or information gathering.