The University of Michigan’s preliminary Index of Consumer Sentiment for October declined 7.5 percent from month-over-month in September to 63 from 68.1 and below the 67.4 reading that analysts had expected. The decline was attributed to consumers’ expectations of even higher impacts from inflation in 2024.
Year-over-year, the University’s Index of Consumer Sentiment was up 5.2 percent from 59.9 in the year-ago period, depressed by recent near-peak inflation levels. Consumer sentiment remains far below the levels that were the norm in the 2010s.
Surveys of Consumers Director Joanne Hsu said, “Consumer sentiment fell back about 7 percent this October following two consecutive months of very little change. Assessments of personal finances declined about 15 percent, primarily on a substantial increase in concerns over inflation, and one-year expected business conditions plunged about 19 percent. However, long-run expected business conditions are little changed, suggesting that consumers believe the current worsening in economic conditions will not persist. Nearly all demographic groups posted setbacks in sentiment, reflecting the continued weight of high prices.
“Year-ahead inflation expectations rose from 3.2 percent last month to 3.8 percent this month. The current reading is the highest since May 2023 and remains well above the 2.3-3.0 percent range seen in the two years prior to the pandemic. Long-run inflation expectations edged up from 2.8 percent last month to 3.0 percent this month, again staying within the narrow 2.9-3.1 percent range for 25 of the last 27 months. Long-run inflation expectations remain elevated relative to the 2.2-2.6 percent range seen in the two years pre-pandemic.”
The Economic Conditions Index tumbled to 66.7 in October from 71.4 in September, while the Index of Consumer Expectations dropped to 60.7 in October from 66.0 in September.
