Consumer sentiment unexpectedly fell in early October, according to a new report from the University of Michigan. The preliminary October sentiment index declined to 68.9 from 70.1 in September. Economists had predicted a reading of 71.
Consumers expect prices will climb 2.9% over the next year, up from the 2.7% expected in September. This marks the first increase in five months. However, they see costs rising 3% over the next five to 10 years, down from 3.1% in the prior month.
Joanne Hsu, director of the survey, said in a statement, “Despite strong labor markets, high prices and inflation remain at the top of consumers’ minds.”
Households remain troubled by high prices that they also see as outpacing their income gains in the year ahead.
Consumer sentiment declines in October
A measure of consumers’ perception of their current financial situation dropped to the lowest level since the end of 2022.
The share of consumers who expect unemployment to rise in the coming year fell to 31%, the lowest reading in 10 months. Respondents welcomed the Federal Reserve’s decision last month to start lowering borrowing costs. Views of buying conditions for durable goods such as cars and major appliances edged up to a four-month high.
Looking at homebuying conditions, concerns about high interest rates fell to the lowest in 15 months. However, a majority still sees borrowing costs as too high, suggesting that further easing is necessary to bolster sales. The current conditions gauge slipped to 62.7 from 63.3. A measure of expectations fell to 72.9 this month from 74.4 in September.
Separate figures on Friday showed no change in a gauge of prices paid to producers in September, suggesting further progress toward tamer inflation.
