The University of Michigan’s Surveys of Consumers said its Consumer Sentiment Index fell to 48.0 in October, down from 48.1 in September and only above the record low of 44.8 recorded in May. The index measures how consumers feel about their personal finances, whether it is a good time to make major purchases, and their expectations for the economy over the next year and five years.
“Purchasing power continues to dominate consumer views of the economy,” said Joanne Hsu, director of the Surveys of Consumers. “Sentiment is now 10 percent below a year ago and 15 percent less than February, just prior to the Iran conflict.”
Weaker sentiment was fuelled by self-identified political independents, whose reading dropped to 42.4, slightly above the all-time low of 40.6 in May. Since January, the number of independents pointing to inflation hurting their finances rose by 27 percent. Republicans citing the same issue rose by 52 percent, and Democrats by 15 percent. Households with limited or no stock market exposure also cited high prices more frequently than at the start of the year.
Consumers’ expectations for inflation over the next five years rose to 3.5 percent from3.4 percent in September and 3.2 percent in March. “Consumers broadly expect inflation to accelerate, and this year’s increases in inflation expectations are not limited to one part of the political spectrum,” Hsu wrote.
The report comes ahead of the Federal Reserve’s final monetary policy decision before the midterm elections, with the Fed largely expected to hold rates at 3.75–4.00 percent. Inflation rose by 3.7 percent year-on-year according to the recent consumer price index, and petrol prices averaged $4.29 per gallon on Friday, down from $4.47 a month ago.