U.S. federal deficit jumps sharply in October as delayed payments from the 43-day shutdown pile up, while soaring interest costs and weak consumer confidence add pressure.

1. Federal Deficit Surges as Backlogged Payments Hit After the Shutdown

The U.S. Treasury Department has released the first fiscal report of 2026—published later than usual due to the 43-day government shutdown—and the findings reveal a financial landscape strained by delayed obligations and mounting costs. A significant share of mandatory expenditures, most notably federal employee salaries, was postponed during the shutdown and subsequently lumped into the October spending total.

According to the report, the October federal deficit rose to USD 284 billion, up USD 27 billion from the same month in 2024. This sharp increase reflects both the lingering disruptions caused by the shutdown and the unusual timing of several key financial obligations.

A major factor behind the inflated deficit is the government’s decision to shift USD 105 billion in benefit payments from November to October. Without this technical adjustment, the “true” monthly deficit would stand closer to USD 180 billion, a substantially smaller figure than the headline number.

Total federal spending for October reached USD 689 billion, marking an 18% rise from last year as it included expenses that would normally have been booked in November.

The Treasury added that it has not yet compiled a full estimate of the savings generated by delayed payments during the shutdown. However, it emphasized that the figure is small—likely under 5% of monthly spending. Under federal law, all delayed salaries and commitments must be paid in full once government operations resume, adding further pressure to October’s expenditure.

2. Revenues Reach a Record High but Still Cannot Offset the Deficit

Despite the surge in spending, the U.S. government recorded USD 404 billion in total revenue for October—the highest level ever reported for that month and a 24% increase from 2024.

The most striking contributor to this record was tariff revenue, which climbed to a historic USD 31.4 billion. The spike was fueled by new import duties imposed by President Donald Trump in January. According to the president, tariff revenues are expected to “skyrocket” further as American companies deplete their pre-tariff stockpiles and fully transition to the new tax regime.

However, not all institutions share the White House’s optimism. The Congressional Budget Office (CBO) announced that recent U.S. trade agreements have forced them to reduce their estimate of tariff contributions to deficit reduction by 25% over the next decade—lowering the forecast from USD 4 trillion to USD 3 trillion.

Beyond tariffs, personal income tax receipts were also robust. Non-withheld income taxes rose to USD 80 billion, up 75%, largely because California residents—granted a wildfire-related tax extension—submitted deferred payments in October. Withheld income taxes increased by 6%, reaching USD 279 billion.

In contrast, corporate tax revenue remained flat at USD 18 billion, reflecting the lingering effects of Republican-backed tax cuts and incentives that continue to dampen corporate contributions.

3. Interest Costs Emerge as a Growing Burden on Federal Finances

One of the most concerning figures in the October report is the enormous USD 104 billion in interest payments, a 27% increase compared with the same period last year. A combination of elevated interest rates—averaging 3.36%—and the government’s expanding debt stock has turned interest expenses into one of the fastest-growing components of federal outlays.

With borrowing needs rising and rates remaining high, economists warn that debt servicing could soon overshadow other spending priorities, creating a long-term fiscal challenge unless monetary policy eases meaningfully in the coming quarters.

4. Consumer Confidence Falls Sharply, Signaling Broader Economic Strain

Alongside fiscal instability, new economic data shows that American consumer confidence has weakened noticeably. According to the latest survey by the Conference Board, the Consumer Confidence Index fell to 88.7 in November, down from 95.5 in October and the lowest reading since April.

Both key sub-indices deteriorated:

The Present Situation Index slipped to 126.9

The Expectations Index fell to 63.2, marking 10 consecutive months below the critical threshold of 80, which historically signals elevated recession risk

Households have become increasingly cautious about job prospects, income growth, and business conditions heading into early 2026. Only 27.6% of respondents described the labor market as “plentiful,” compared with 28.6% in the previous month.

On the same day, private-sector payroll data from ADP painted an even darker picture, showing that U.S. companies lost an average of 13,500 jobs per week over the four weeks ending November 8. The report has added to concerns that the labor market—which helped sustain economic momentum through 2024 and early 2025—is now showing signs of fatigue.

5. America’s Fiscal Outlook: A Convergence of Structural and Short-Term Pressures

Even with record-breaking revenues, the U.S. faces a complex array of fiscal challenges. The aftermath of the prolonged shutdown, the rapid rise in interest expenses, stagnant corporate tax contributions, and weakening household sentiment collectively portray a financial system under strain.

As policymakers prepare for a contentious budget debate heading into 2026, economists warn that the government may need to confront tough decisions on spending, taxation and debt management. At the same time, deteriorating consumer confidence and early signs of labor-market weakness suggest that broader economic headwinds could complicate the recovery from the shutdown’s ripple effects.

FAQs

1. Why did the U.S. federal deficit rise so sharply in October?

Because spending was inflated by delayed payments from the 43-day shutdown and by the shift of USD 105 billion in benefits from November to October.

2. Why were government revenues unusually high?

Record tariff revenue and deferred personal income tax payments—especially from California—helped push total collections to an all-time high for October.

3. What is driving the rise in federal interest costs?

High interest rates and a larger national debt have pushed monthly interest payments to USD 104 billion, creating a growing fiscal burden.

4. Why is consumer confidence falling?

Americans are increasingly concerned about business conditions, job prospects and income stability, which has pushed the Expectations Index below recession-signal territory.