U.S. consumer confidence fell in October, reversing recent gains, as Americans expressed frustration over persistent high prices.
The closely watched consumer sentiment survey from the University of Michigan shows that Americans’ confidence in the economy tumbled in October after two months of small gains, with frustration over high prices to blame.
The University of Michigan’s preliminary consumer sentiment reading, released on Oct. 11, came in at 68.9 for October, a decline from September’s final reading of 70.1. That’s a drop of 1.2 points and lower than market predictions for a reading of 70.8.
While October’s sentiment reading represents a decline from the prior two months, it remains substantially above the record low of 50 it registered in June 2022, a month in which inflation hit a multi-decade high of 9 percent.
Inflation was once again the culprit behind October’s decline in U.S. consumer confidence, according to the University of Michigan’s Surveys of Consumers Director Joanne Hsu.
“While inflation expectations have eased substantially since then, consumers continue to express frustration over high prices,” Hsu said in a statement. “Still, long run business conditions lifted to its highest reading in six months, while current and expected personal finances both softened slightly.”
The sentiment survey shows that consumers expect prices will rise 2.9 percent over the coming 12 months, an increase from the 2.7 percent expected in September. By contrast, long-run inflation expectations (over the next 5–10 years) dipped from 3.1 percent in September to 3 percent in October.
Also, while long-run business conditions rose, consumers’ views of their current financial situation fell to their lowest reading since the end of 2022.
Despite their gloomy view on their finances, consumers have generally kept spending, helping prop up the U.S. economy. According to the Federal Reserve Bank of Atlanta’s real-time GDP gauge, updated on Oct. 9, the economy expanded at a healthy pace of 3.2 percent in the third quarter.
Meanwhile, other inflation-related data released on Oct. 11 showed that business input cost inflation and a measure of underlying inflationary pressures both rose above expectations.
By Tom Ozimek
