U.S. consumer sentiment inches lower in October, UMich survey shows

Investing.com - U.S. consumer sentiment fell in October, as lower-income households in particular fretted over increased cost-of-living pressures, while jitters surrounded the wider economic outlook.

The University of Michigan's index of consumer sentiment for this month came in at 46.3, down from 48.1 in September. Economists had predicted a reading of 47.5.

Expectations for inflation over the year ahead climbed to 4.7% from 4.6%, versus estimates of 4.8%. Price growth, as measured by the consumer price index, last stood at an annualized rate of 3.4% in August.

In a statement, Joanne Hsu, Surveys of Consumers Director at the University of Michigan, flagged that the inflation expectations were substantially above the 3.4% level seen in February, prior to the start of the U.S.-Israeli assault on Iran.

The war, which has now dragged on for more than half a year, has squeezed global energy supply flows out of the Middle East, sending prices for refined products like gasoline and diesel higher. Worries have abounded that energy-driven inflation will persuade the Federal Reserve to embark on a policy tightening cycle in response. In September, the Fed hiked interest rates for the first time since 2023.

Long-run inflation expectations also stepped up to 3.5% from 3.4%. Hsu flagged that this was "notably higher than their 2024 range of 2.8% to 3.2%."

Affordability concerns have become a defining feature of the upcoming midterm elections in the U.S., with polls suggesting that voter frustration with elevated prices could cause President Donald Trump's Republicans to lose control of at least one of the chambers of Congress.

Hsu said that sentiment for less well-off households and those with smaller stock portfolios dropped steeply in October, highlighting that these are "groups that have fewer resources to weather increases in prices."

"Frustration over cost-of-living continues to mount, as consumers across the political spectrum believe that the trajectory of the economy has weakened since the beginning of the year," Hsu said.

However, recent economic data has suggested that consumer spending, a key driver of the American economy, has so far been broadly resilient to inflation. Retail sales, for instance, rebounded sharply in August thanks in part to robust expenditures on a range of goods, as well as at bars and restaurants.

Original Article

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