US consumer sentiment falls as conditions for big purchases plunge

The University of Michigan said buying conditions for big purchases had weakened on Friday, October 9, as it reported that its Consumer Sentiment Index fell to 46.3 points in early October. This is down from 48.1 in September and below the 47.8 forecast by economists, according to Reuters. The university will publish a final reading on Friday, October 23.

The university's index did not fall below 66.4 in any month of 2024. At 46.3, this month's reading is the weakest reading since May, when the index hit 44.8 points.

Current conditions, the part of the University's survey that asks how finances are now and whether it is a good time to buy durables such as a car or an appliance, fell to 44.7 from 50.9 in September, a drop of 6.2 points. Expectations for the year ahead rose 1 point, to 47.3.

"While year-ahead expectations for personal finances and business conditions crept up slightly, buying conditions for durables plummeted amid high prices and borrowing costs," said Joanne Hsu, director of the Surveys of Consumers.

Consumers expect more price inflation

Hsu said views among lower-income consumers and people with smaller stock portfolios dropped steeply. Those groups, she said, have fewer resources to weather increases in prices.

"Frustration over cost-of-living continues to mount, as consumers across the political spectrum believe that the trajectory of the economy has weakened since the beginning of the year," she said.

Household expectations for inflation rose for a second straight month, to the highest level since May. Households expect prices to rise 4.7% over the next year, up from 4.6% in September. The university said that figure substantially exceeds the 3.4% annual inflation expected in February, before the Iran conflict began, as well as every year-ahead reading from 2024.

In May, the university said supply disruptions in the Strait of Hormuz were lifting gasoline prices, three months into that conflict.

Expectations for prices over the next five years rose to 3.5%, above the 2.8% to 3.2% range for that measure in 2024.