U.S. consumer sentiment slips to five-month low as inflation worries grow
The University of Michigan index fell to 48 in October. Consumers expect 4.7% inflation, and buying conditions for durable goods hit a record low.
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U.S. consumer sentiment soured further in October. The University of Michigan index fell to 48.0 in the final reading from 48.1 in September, its lowest level in five months, Reuters reported. The preliminary estimate had been 46.3; the final figure beat the forecasts of all economists polled by Bloomberg, according to Reuters. The index is about 10% lower than a year earlier and 15% below February, before the Iran conflict began, Quartz reported. Households were surveyed from Sept. 22 to Oct. 19.
Assessments of current conditions deteriorated markedly, with that sub-index falling to 46.7 from 50.9. Survey director Joanne Hsu said the decline came entirely from an 18% drop in buying conditions for durable goods, which hit a record low, driven by high prices and rising interest rates. The expectations sub-index, by contrast, rose to 48.8 from 46.3, the first improvement since July. "Purchasing power continues to dominate consumer views of the economy," Hsu said, according to Axios. Gasoline remains well above $4 a gallon.
At the same time, inflation expectations are rising. Consumers expect prices to rise 4.7% over the next 12 months, up from 4.6% the previous month, and 3.5% a year over the next five to 10 years. Both are the highest readings since May. After five years of above-target inflation, that is "exposing risks that elevated inflation expectations could become entrenched," Hsu warned. Nearly 70% of respondents expect interest rates to rise in the coming year, the highest share in more than three years. The data are among the last snapshots of sentiment before the U.S. midterm elections in early November.