US Consumer Sentiment Tumbles In October, Inflation Expectations Climb: 'Setbacks In Sentiment'

Consumer confidence in the United States continued its downward trend for the third consecutive month in October, as increasing interest rates and persistent inflation weighed on household sentiment.

Preliminary data from the University of Michigan released Friday reveals a drop in consumer sentiment from 68.1 in September to 63 in October, falling short of the expected 67.2 and marking the lowest level since June.

Additionally, the subindex for consumer expectations declined from 66.5 to 60.7, sharply missing market expectations of 65.5, while the index for current conditions dipped from 71.4 to 70, below the anticipated 70.4.

Unexpectedly, consumer inflation expectations rose, with year-ahead inflation expectations sharply increasing to 3.8%, up from 3.2% in September and representing the highest figure since May of this year. The five-year forward inflation expectation surged from 2.8% to 3%.

“Consumer sentiment fell back about 7% this October following two consecutive months of very little change. Assessments of personal finances declined about 15%, primarily on a substantial increase in concerns over inflation, and one-year expected business conditions plunged about 19%,” said Joanne Hsu, the university’s director of consumer surveys.

“Nearly all demographic groups posted setbacks in sentiment, reflecting the continued weight of high prices,” Hsu said.

Inflation expectations for the year ahead increased from 3.2% in the previous month to 3.8% this month. This current figure marks the highest level since May 2023 and continues to surpass the 2.3-3.% range observed in the two years leading up to the pandemic.

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