US Consumer Sentiment Drops as Inflation Expectations Rise
University of Michigan data shows US consumer sentiment fell to 46.3 in October due to rising prices and borrowing costs linked to the Middle East conflict.
The University of Michigan reported a decline in U.S. consumer sentiment in early October, with the Consumer Sentiment Index falling to 46.3 from September's 48.1. This figure missed the 47.8 forecast by Reuters-polled economists. The drop is attributed to rising prices and increased borrowing costs, driven in part by the U.S.-Israeli war with Iran.
Buying conditions for homes, cars, and durable goods have fallen near historic lows. While wealthy consumers continue to benefit from stock market gains, middle- and lower-income households are experiencing price fatigue and are reducing spending on nondiscretionary items such as groceries. This disparity has led to the steepest sentiment drops among those with smaller stock portfolios and limited resources.
Inflation expectations have also ticked upward. One-year expectations rose to 4.7% from 4.6% in September, while five-year expectations increased to 3.5% from 3.4%. Twelve-month expectations have surged since February, prior to the start of the conflict. Politically, sentiment declined sharply among independents, though it improved slightly among Democrats and Republicans. Despite these partisan differences, consumers across the political spectrum agree that the economic outlook has soured since the beginning of the year.
